Crypto exchange Binance has withdrawn a non-binding offer to buy rival digital firm FTX after conducting a thorough investigation with due diligence. Binance believes FTX’s problems are too grave and that it lacks the ability to resurrect the failing company. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance stated.
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Meanwhile, Sam Bankman-Fried, founder and CEO of FTX, notified investors today that the company will try to raise capital on its own in the coming week. As per a WSJ report, Bankman-Fried has told FTX employees that “The goal of this raise will be first to right by customers; second by current and possible new investors; third of all you guys,” while his own interests take the last priority.
FTX is supposedly in talks with crypto wizard Justin Sun, founder of Tron, who also tweeted similar thoughts on his social media handle today, “We are putting together a solution together with (FTX) to initiate a pathway forward.”
Recently, Bankman-Fried warned investors about the liquidity crunch at FTX. He stated that the company lacked approximately $8 billion in liquidity. The company even sought to raise up to $4 billion in equity to fund the shortfall.
Furthermore, institutions that bet their horses on FTX last year stand to lose big bucks on their investments amid FTX’s solvency issues. The depositors at FTX started withdrawing money in a frenzy, forcing the bank to briefly block both trader and consumer withdrawals.
At the same time, crypto exchange Crypto.com also stopped customer withdrawals and deposits of Solana (SOL-USD) stablecoins, namely USDC (USDC-USD) and USDT (USDT-USD). A link between Solana’s coin supply with FTX and sister company Alameda Research, and the subsequent fallout, may have been the reason for the exchange’s suspension of transactions.
The lack of support for FTX poses a potential systemic collapse-like situation. Bankman-Fried’s attempts to reassure investors have failed, and investors on other exchanges may soon feel the same way. Also, the Securities and Exchange Commission (SEC) and the Justice Department are investigating the FTX for possible criminal and civil charges for failure to adhere to their rules.
Wednesday witnessed a massive rout of cryptocurrencies, led by Bitcoin’s (BTC-USD) slump below $16,000, and Ethereum’s (ETH-USD) dropping nearly 15%. Several crypto-related companies, including blockchain miners and exchanges, saw their share values plunge to all-time lows.
Meanwhile, ace hedge fund manager Cathie Wood took advantage of the dip in crypto stocks. Notably, ARK Invest gobbled up an additional $21.4 million worth of Coinbase Global (NASDAQ:COIN) shares on Tuesday.
