In the latest crypto news, Binance has backed out of its plans to acquire FTX. On Wednesday, the company announced that it would pull out of the deal to acquire its rival, who is facing insolvency. Binance, the world’s largest cryptocurrency exchange, stated that FTX’s insolvency issues were “beyond our control or ability to help.”
The decision comes just a day after Binance CEO CZ announced that the cryptocurrency exchange had reached a nonbinding agreement to buy FTX’s international business for an undisclosed sum in an attempt to rescue the company from a liquidity crisis. Private investors valued FTX at $32 billion earlier this year.
Bankman-Fried, known to crypto enthusiasts simply as SBF, drew comparisons to investing moguls like J.P. Morgan and Warren Buffett as he organized a series of bailouts for struggling cryptocurrency firms earlier this year. He has appeared in advertisements alongside well-known figures such as Gisele Bündchen as part of a campaign to encourage the mass adoption of cryptocurrency.
The Liquidity Crisis
Bankman-Fried was scrambling on Monday night to raise money from VCs and other investors before going to Binance. Zhao agreed to step in at first, but his company quickly reversed course, noting reports of “mishandled customer funds and alleged U.S. agency investigations.”
FTX, like Bankman-vast Fried’s crypto empire, is doomed to fail without a bailout. According to The Wall Street Journal, Bankman-Fried informed FTX investors on Wednesday that he requires emergency funding to cover an $8 billion loss of funds caused by recent withdrawal requests. FTX’s turmoil caused virtually all digital assets to plummet on Wednesday.
The FTX crisis slammed crypto assets, with Bitcoin falling 24% in two days and Ethereum falling 29%.
FTX Crisis Catches The Eyes of U.S. Regulators
On Wednesday, the Securities and Exchange Commission (SEC) Chairman Gary Gensler issued a grim warning to cryptocurrency platforms after publicly encouraging them to register with his agency for more than a year. He also compared the cryptocurrency market to a stack of Jenga blocks that weakens with each failure.
Gensler stated, “We will continue to do our job as a cop on the beat. The runway is getting shorter for some of these intermediaries, I have to say.”
Mr. Gensler has repeatedly demanded that trading platforms like FTX register with the SEC and adhere to the same rules as traditional stock exchanges. He and his deputies have threatened to launch enforcement campaigns if the companies do not comply.
Even before FTX’s insolvency crisis, regulators in the U.S. were under increasing pressure to bring crypto firms into compliance with investor-protection laws. Over the last year, cryptocurrencies have lost two-thirds of their value, more than $2 trillion in total market value, as a series of token issuers, lending platforms, and investment firms failed.
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