"This is the direct result of a rogue actor breaking every single basic rule of fiscal responsibility," Binance Chief Strategy Officer Patrick Hillmann said in a statement given to the Wall Street Journal (WSJ). "While the rest of the industry operates under an extreme measure of scrutiny, the cult of personality shrouding FTX allowed them a dangerous level of privilege that wasn't earned."
Binance originally signed a letter of intent to acquire FTX on Nov. 8, but canceled the plan the next day after scrutinizing FTX's structure and books a day later.
"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," the company said on Nov. 9. "As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX." (Related: Binance backs out of bailout plan to rescue FTX, causing further turmoil across crypto markets.)
A Nov. 10 report by the WSJ revealed that FTX has been left with a gaping hole after it used billions of dollars to boost sister trading firm Alameda Research. The latter had incurred huge losses in mid-2022, which the now-resigned FTX CEO Sam Bankman-Fried propped up with customer assets. A CoinDesk report backed up the WSJ report by showing that much of Alameda Research's balance sheet was being funded by FTT, FTX's proprietary crypto token.
13 FTX affiliated companies also start bankruptcy proceedings
Meanwhile, FTX announced on Nov. 11 that it will begin bankruptcy proceedings in the United States. It added that Alameda Research, which inside sources blame for FTX's collapse, is also part of the bankruptcy protection. Insiders noted that Alameda owes FTX about $10 billion.
The company said in a statement that around 13 affiliated companies have also started bankruptcy proceedings. "The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders," incumbent FTX CEO John J. Ray III elaborated. Ray was appointed CEO after Bankman-Fried stepped down.
FTX's collapse has intensified concerns about the future of the crypto industry, which faces the difficult challenge of regaining the approval of retail investors. It also brings into question the future of smaller corporations like BlockFi and bankrupt crypto lender Voyager Digital, which had signed rescue packs with FTX after the dramatic crash of TerraUSD in May.
Ray clarified that several entities connected to FTX – including FTX Australia, FTX Express Pay, the Bahamas-based FTX Digital Markets and options platform LedgerX – are not involved in the proceedings.
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Watch G News founder Miles Guo commenting on Binance's plan to acquire FTX.
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