Battle of Crypto Titans Ends: Binance to Acquire FTX

Binance CEO Changpeng Zhao announced on Tuesday that his company has tentatively agreed to acquire competitor Sam Bankman-Fried's FTX for an undisclosed amount.

The deal does not include FTX US or Binance US, the separate U.S. operations of the respective cryptocurrency exchanges, Bankman-Fried said on Twitter. 

"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," Zhao wrote on Twitter Tuesday morning. "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 FTT token, which had slumped as low as $14.57 on Tuesday morning on rumors that FTX had suspended withdrawals, briefly rebounded on the news. The token gives FTX users discounts on their trading feeds and referral commissions. Meanwhile Binance Coin (BNB), FTT’s counterpart on Binance’s exchange, shot up 10% to $368.07 on the news of the pending deal. 

If the deal proceeds, it will combine two of the largest cryptocurrency exchanges in the world. As of Tuesday morning, Binance and FTX combined for $34 billion in trading volume—one quarter of all trades on centralized exchanges, according to data from CoinGecko.

Both Zhao and Bankman-Fried said that their respective teams will be conducting due diligence on the deal.

Bankman-Fried confirmed the agreement in his own thread on Twitter, saying that the two exchanges had agreed to a "strategic transaction." He also addressed a withdrawal backlog, which appeared to be behind reports that the exchange had suspended withdrawals on Tuesday morning.

"Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1," Bankman-Fried wrote. "This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc.—we apologize for that."

Although both Zhao and Bankman-Fried have maintained that they weren’t sparring with one another, things have seemed contentious since the weekend.

How did we get here?

The groundwork for all of this was laid years ago. Binance was an early investor in FTX in 2019. Last July, Binance was facing increased pressure from regulators, and FTX bought out Binance’s shares. “I think there are some differences between how we run our businesses,” Bankman-Fried told Decrypt at the time.

“We try really hard to be as cooperative as we can with regulators," he continued. "When you sort of appear less flexible or responsive, I think that’s more likely to lead to cases where regulators might feel like they have no choice but to start bringing the hammer.”

While the FTX CEO didn’t outright say it, the clear implication was a critique of Binance's adversarial approach to regulation. FTX paid out Binance in FTT tokens.

The two exchanges continued to compete, both expanding their international reach throughthe May crypto crash. As recently as September, Binance and FTX were the two leading contenders in securing the assets of failed exchange Voyager, with Bankman-Fried saying he had $1 billion to spend on bailing out failing crypto firms—meanwhile declaring that the worst of the crypto crisis had passed.

Voyager rebuffed FTX, calling its overture “a low-ball bid dressed up as a white knight rescue.” But FTX eventually prevailed, paying $1.4 billion.

In October, Binance made headlines in supporting Elon Musk’s $44 billion takeover of Twitter. Meanwhile, it was Bankman-Fried’s turn in the regulatory crosshairs, with Texas officials investigating allegations of securities violations.

The final turn

Zhao suddenly announced on Twitter on Sunday that Binance would liquidate all of its FTT tokens, one day after on-chain data showed that Binance had already moved $584 million worth of its FTT on Saturday. The impact of the announcement was swift. In 24 hours, $1.2 billion worth of Ethereum and ERC-20 tokens was withdrawn from FTX, according to blockchain data firm Nansen. 

There’s been a $377 million decrease in stablecoin balances on FTX over the past two days, according to Nansen. That includes the USD Coin (USDC) balance on the exchange dropping from $164 million at the end of last week to $30 million on Tuesday, and its Tether (USDT) balance dropping from $140 million to $32 million over the same period.

Among the big withdrawals were crypto lender Nexo moving $201 million worth of Ethereum and asset manager Arca withdrawing 37 million ETH and 25 million USDT from FTX, according to Nansen.

On Tuesday came the stunning announcement from Bankman-Fried on Twitter that he has sold FTX to his rival.

Despite the contentious public back-and-forth that led up to it all, Zhao has maintained that the decision for Binance to liquidate its FTT was not an orchestrated play to spark FUD (fear, uncertainty and doubt) about his competitor.

“Funny memes, media & some people tried to color this as a ‘fight,’” he tweeted. “Sorry to disappoint, but I spend my energy building, not fighting."

Editor's note: This article was updated after publication to add further details of the acquisition agreement.