Leading crypto exchange Binance on Tuesday announced a non-binding, letter of intent to acquire its rival FTX for an undisclosed sum in a surprise development.
Binance founder and CEO Changpeng Zhao (CZ) said in a tweet thread that FTX asked for their help.
“There is a significant liquidity crunch. To protect users, we signed a non-binding LOI (letter of intent), intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days,” Zhao posted.
BNB (Binance coin) rose to $370, an increase of 12 per cent in one hour and FTT (FTX coin) rose to a maximum of $22, an increase of 37 per cent in one hour.
Bitcoin bounced back to $20,143 and ETH to $1,535.
Zhao further said that 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. 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,” the Binance CEO said.
In a tweet, Sam Bankman-Fried, CEO of FTX, said that 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,” he posted.
“Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc),” said Bankman-Fried.
In August, the US Federal Deposit Insurance Corporation (FDIC) issued cease-and-desist letters to five crypto companies, including leading cryptocurrency exchange FTX, over “false and misleading statements”.
The FDIC also mentioned a now-deleted tweet that FTX CEO Brett Harrison sent on July 20, that read “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names”.
Harrison later said that “we really didn’t mean to mislead anyone.”
Binance and FTX teams were now working on clearing out the withdrawal backlog as is.
“I know that there have been rumours in media of conflict between our two exchanges, however Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators. We are in the best of hands,” said Bankman-Fried.