Binance cites the findings of due diligence and news of US regulatory investigations into its competitor cryptocurrency exchange as reasons for abandoning plans to acquire FTX.
“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,” says Binance in a series of tweets.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
The reversal occurs a day after Binance and FTX agreed to the acquisition, despite both parties emphasising that this was contingent on a thorough due diligence procedure.
Bloomberg has reported for months that the Securities and Exchange Commission and the Commodity Futures Trading Commission have been probing FTX’s links with FTX US and Alameda Research.
FTX CEO Sam Bankman-Fried runs Alameda Research, a cryptocurrency trading company. A week ago, CoinDesk reported that a leaked balance sheet revealed that FTX’s FTT native coin comprised about a quarter of Alameda’s assets.
This discovery contributed to the liquidity crisis at FTX, with Binance announcing that it would sell its holdings of the cryptocurrency.
Bankman-Fried contacted Changpeng Zhaoa about a potential purchase, since FTX was seeing a rise in withdrawals in recent days, causing worry for its capacity to survive.
However, within hours of this process commencing, Bloomberg reports that Binance discovered a financial hole, citing a source who estimates that the difference between obligations and assets at FTX might exceed $6 billion.
