(CTN News) – After a public spat between the world’s two largest crypto exchanges that contributed to several digital tokens taking a tumble Tuesday, Binance announced Tuesday that it has signed a letter of intent to acquire FTX.
The companies did not disclose the deal’s value, which is non-binding and subject to due diligence.
The deal comes after months of social media clashes between Binance founder Changpeng Zhao and FTX founder Sam Bankman-Fried.
According to Zhao (pictured above), Binance reached the decision after FTX approached the crypto giant. By fully acquiring FTX, the LOI will protect users from the liquidity crunch. In a tweet, he announced a full due diligence would be conducted in the days to come.
In the early days of FTX, Binance, the world’s largest crypto exchange, backed the young firm. However, as FTX gained popularity, the relationship between the two began to wane.
The two billionaires have been hurling snarky remarks at each other for several months, but their relationship hit an all-time low earlier this week after Zhao announced that Binance was selling its holdings of FTT, the native token of FTX exchange, which it acquired last year as part of an exit from the firm.
In response to wide-circulation rumors about Alameda Research’s financial health, Zhao said the firm was liquidating its FTT holdings.
As the founder of the prop trading and market making firm Alameda, Bankman-Fried has some exposure to the FTT tokens. FTT token fell from $25.47 to $14.32 on Tuesday as investors lost faith, according to Binance’s trading view. According to Bernstein, FTX should consider shutting down Alameda due to perceived risks earlier Tuesday.
Added Bankman-Fried, the deal was “a user-centric development that benefits the entire industry.”
CZ has done a great job of creating the global crypto ecosystem, and will continue to do so,” Bankman-Fried said in a tweet.
FTX Binance is working to clear the withdrawal backlog,
He said. There will be no liquidity crunch; every asset will be covered 1:1. This is one of the main reasons we asked Binance to join us. “We apologize if it takes a bit for things to settle.” he said.
As a result of the news, several cryptocurrencies surged.
In terms of value, Binance is estimated to be worth over $300 billion, making it the most valuable crypto exchange in the world. At its most recent funding round (Series C) in January, FTX was valued at $32 billion.
Sequoia Capital, BlackRock, Tiger Global, Paradigm, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Lightspeed Venture Partners, Altimeter Capital, Coinbase Ventures, Sino Global, BOND, and Iconiq Growth are among the firm’s investors. According to Web3 Signals, a crypto dealbook, FTX and its FTX US business have raised over $2.2 billion.
Even the crypto community, which has been accustomed to topsy-turvy developments this year, was shocked by Tuesday’s announcement. After buying a series of companies earlier this year, Bankman-Fried was hailed as a crypto savior.
According to Web3 Signal, FTX Ventures, the venture arm of the crypto exchange, also invests heavily in a number of crypto startups, including Aptos Labs, Messari, Sky Mavis, LayerZero, YugaLabs, and 1inch Network.
According to a source familiar with the matter, Bankman-Fried raised additional capital from investors before approaching Binance. The move has surprised many existing investors, according to Axios.