Binance will walk away from a deal to rescue Sam Bankman-Fried crypto exchange FTX, citing concerns about its business practices and investigations by US financial regulators.
The move comes a day after Binance, one of the world’s largest cryptocurrency exchanges, is expected to agree buying FTX after experiencing liquidity loss.
“Due to the due diligence of the company, as well as the latest news reports regarding the mishandling of client funds and the alleged investigations by US authorities, we have decided that we I will not pursue a potential FTX.com acquisition,” Binance said in a statement late Wednesday.
The turning point came when the Securities and Exchange Commission expanded its investigation into FTXincluding testing the platform’s crypto lending products and customer money management, according to a person familiar with the matter.
Wall Street’s top regulator launched its investigation a few months ago but has submitted a request for additional information for the following: Binance The person added on Tuesday that they will buy back FTX amid a liquidity crunch. The agency is also looking into FTX’s relationship with a US institution, FTX US.
The Commodity Futures Trading Commission is also investigating the company, Bloomberg reported. The SEC and CFTC declined to comment. FTX did not immediately respond to requests for comment on the regulatory probes.
Bitcoin and other crypto-related assets have plummeted over the past two days as traders worry about the potential collapse of FTX, one of the largest crypto trading venues, and Alameda Research, a major digital asset trading company also controlled by Bankman. -Fried.
“The market is now in a state of total panic,” said Jon de Wet, chief investment officer of crypto asset management firm Zerocap. “All hell is breaking.”
Bitcoin, the most actively traded cryptocurrency, fell 12% to $16,282, hitting its lowest level since late 2020. Solana, a major Alameda-backed coin, is down 46%, while shares Shares on US-listed crypto exchange Coinbase fell 9.5%.
Binance’s turnaround comes after FTX admitted that it was unable to accommodate customer withdrawal needs without external funds.
Binance CEO Changpeng Zhao reached an agreement to buy FTX and restore customer deposits after just a few hours of negotiations on Tuesday, after Bankman-Fried appealed to his former investor Become a rival for help.
“Prior to that, I had very little knowledge of the internal state of things at FTX,” Zhao said in a memo to his staff Wednesday.
The boss of Binance had hoped to prevent more customers from suffering after a string of famous failures by crypto companies this year has dented confidence in the sector. He also wants to prevent a domino effect from damaging companies exposed to FTX and Alameda through lending or trading positions.
“Initially, our hope was to be able to assist FTX customers to provide liquidity, but issues were beyond our control or ability to help,” Binance said. “Every time a major player in the industry fails, retail consumers suffer the consequences.”
Additional reporting by Scott Chipolina