Binance announced that it intends to fully acquire FTX to protect its users from a liquidity crunch.
Changpeng Zhao, the CEO of Binance, said on Twitter that FTX approached the exchange looking for help as it was struggling with liquidity on its platform. CZ said that Binance signed a non-binding letter of intent (LOI) to acquire the company in the coming days.
A full due diligence process is expected to be completed in the next few days, as well as more detailed information about the acquisition.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ Binance (@cz_binance) November 8, 2022
“There is a lot to cover and will take some time. This is a highly dynamic situation, and we are assessing the situation in real-time,” CZ said on Twitter. “Binance has the discretion to pull out from the deal at any time. We expect FTT to be highly volatile in the coming days as things develop.”
Sam Bankman-Fried, the founder and CEO of FTX and Alameda Research, confirmed the acquisition, saying that Binance has become the first and last investor in FTX.
FTX has come to an “agreement on a strategic transaction” with Binance, SBF said but provided no time frame as to when the acquisition will be completed.
SBF reiterated that customer funds will be protected as both Binance and FTX were working on clearing out the withdrawal backlog. As CryptoSlate previously covered, FTX came under fire for failing to process any withdrawals on the Ethereum blockchain for over three hours.
All of the assets on FTX will be covered 1:1 and the liquidity crunch the exchange was experiencing will be cleared out, SBF said in a tweet.
“This is one of the main reasons we’ve asked for Binance to come in. It may take a bit to settle etc. — we apologize for that.”
4) A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.
— SBF (@SBF_FTX) November 8, 2022
SBF noted that FTX.US and Binance.US are two separate entities from FTX and Binance and have not been impacted by the acquisition. FTX.US, the exchange U.S. arm, has been operating normally and the platform is fully liquid.
Binance’s native token BNB soared on news of the acquisition, spiking over 20% in minutes.
BNB’s spike pulled the rest of the market with it into the green, including FTX’s native token. FTT saw a vertical drop that wiped out over 36% of its price as rumors of the exchange’s insolvency began circulating. However, Binance’s intent to acquire the exchange sent the token’s price skyrocketing — FTT gained over 20% at press time.
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