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Crypto giant Binance cancels bid to save rival and fuels chaos in digital assets

New York, USA (CNN)–In a surprising downturn, cryptocurrency exchange Binance has pulled out of a deal to acquire rival FTX, saying the company’s problems are “beyond our control or our ability to help.”

Binance, the world’s largest cryptocurrency exchange, said it was reviewing FTX’s finances, citing reports of “mismanagement of client funds and an alleged US agency investigation” in announcing the deal was halted.

Undo is the latest twist in an exciting, fast-paced saga featuring the most powerful players in the crypto world.

It also represents a stunning downfall for Sam Bankman-Fried, the 30-year-old industry star who founded FTX in 2019. Known as SBF, Bankman-Fried has drawn regular comparisons with investment icons like Warren Buffett and JP Morgan as he engineered a series of corporate bailouts. Distressed crypto earlier this year. He has appeared in advertisements alongside celebrities such as Gisele Bundchen, as part of a campaign to bring cryptocurrency into the mainstream.

Without a bailout, FTX is poised to collapse, along with the rest of Bankman-Fried’s vast crypto empire.

According to The Wall Street Journal, Bankman-Fried told investors on Wednesday that he needs emergency funding to cover a shortfall of up to $8 billion due to withdrawal requests received in recent days.

Practically all cryptocurrencies fell on Wednesday due to the turmoil in FTX.

Bitcoin plunged below $16,000, its lowest level in two years, after Binance confirmed that it would not buy FTX. The cryptocurrency is down more than 75% from its all-time high near $69,000 a year ago. Ether, the second most popular coin, was down about 13% to $1,137, which is also a 75% drop from its record high.

Binance and FTX representatives did not immediately respond to requests for comment on Wednesday.

Even for assets that are known to be volatile, it has been a rough week.

The FTX saga escalated over the weekend, when Binance CEO Shanyang Zhao said his company would liquidate its holdings in FTX as speculation swirled about the company’s financial health. Despite the animosity between Bankman-Fried and Zhao, the rivals appeared to have come together in a deal that stunned the crypto world on Tuesday, when Binance said it would acquire FTX.

However, investors got nervous about the deal and immediately sold digital assets of all scales.

According to Bloomberg, the FTX collapse is already under investigation by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The site stated that regulators are investigating whether FTX properly handled client funds, citing people familiar with the investigation.

A spokesman for the Securities and Exchange Commission said the commission does not comment on the presence or absence of a potential investigation. The CFTC also declined to comment.

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