Binance has announced that it “will not pursue the potential acquisition of FTX.”

Binance on Twitter announced that the crypto exchange would end acquisition plans because, among other reasons, FTX has mishandled customer funds.

The first investor to fund FTX was Binance, the world’s largest cryptocurrency exchange.

“As a result of corporate due diligence, as well as recent news reports of mishandling of customer funds and alleged investigations by the US agency, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance tweeted.

Before the cancellation, Binance had been planning to help clients of the US-based crypto exchange provide liquidity. However, the company has stated that the issues FTX is concerned about are “beyond our control or ability to help.”

One Twitter user responded to Binance’s tweet saying, “It’s really easy! If you try to add 2+2 and it equals -5, then there is a problem that no one can fix.” referring to the financial problems surrounding FTX.

Bankruptcy possibility?

Binance has not provided detailed information on the issues that concern FTX. Still, press reports have indicated that the crypto exchange could have discovered a deep gap between FTX’s liabilities and assets, which amounted to more than $6 billion.

Additionally, FTX CEO Sam Bankman-Fried has informed investors that the crypto exchange would have to file for bankruptcy if it fails to secure a cash injection, according to Bloomberg, who received this information from a person with direct knowledge of the matter.

Bankman-Fried, once worth $26 billion, also informed them that its crypto exchange is facing a shortfall of up to $8 billion and needs $4 billion to remain solvent.

FTX CEO Sam Bankman-Fried had, until recently, been buying cryptocurrency companies that were struggling due to a credit crisis caused by the sudden collapse of cryptocurrencies Luna and UST or TerraUSD.

FTX now has a mission to raise bailout financing in the form of debt, equity, or a combination of the two, the person familiar with the matter told Bloomberg.

Facing Legal Challenge

The sudden implosion of FTX this week also put them under investigation by the Securities and Exchange Commission (SEC) and the Department of Justice, a person familiar with the matter told the Wall Street Journal (WSJ).

The SEC will examine FTX for violating civil investor protection laws, while the Department of Justice will investigate criminal violations.

Meanwhile, the US branch of the crypto exchange, FTX.US, has been under investigation by the SEC for months, as they believe that some of the crypto tokens listed by the exchange could be included in securities, which should have been registered under the law of the US with the SEC. before being sold to investors.

Crypto market crisis

The crypto market witnessed a further decline following the cancellation of the FTX acquisition. Bitcoin fell as much as 15% to $15,987 on Wednesday, the smallest drop since November 2020, which was also the two-day drop to around 23%, the highest since June 2022.

FTX’s native token, FTT, crashed by more than 40%.

While Solana dropped around 46%. The Solana blockchain is associated with both FTX and Bankman-Fried’s cryptocurrency trading house, Alameda Research.

Market sentiment sparked by the FTX-Binance drama has shown a similar phenomenon among traders as Celsius Networks crashed, leaving several investors bankrupt.

Clients have been unable to recover assets since FTX halted some withdrawals earlier in the week, similar to the failure of crypto firms Celsius and Voyager, which saw billions in client money tied up in bankruptcy proceedings.

The FTX-related issues began after Binance CEO Changpeng Zhao (CZ) planned to sell all of his FTT tokens on Nov. 6. FFollowing his movement, the price of FTT fell 15% to $18 in Singapore.

Before the crash, Bankman-Fried’s trading house, Alameda Research, had offered to buy all of Binance’s FTT tokens at $22.

The offering came after CZ offered on Sunday to sell FTT’s roughly $530 million stake in the cryptocurrency firm.

CZ has denied claims that selling FTT tokens was a “move against a competitor”, but his latest tweets have hinted that he was unhappy with FTX.

CZ and Bankman-Fried have been caught up in an ongoing argument on Twitter over topics ranging from lobbying US politicians to accusations of cutting-edge operations over the past few months.

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