June 12, 2024


Amid the drama of the proposed acquisition of FTX by Binance, there are voices emerging doubting whether the deal will actually go through.

Binance CEO Changpeng Zhao said he signed a non-binding letter of intent to acquire rival cryptocurrency exchange FTX. Zhao said the exchange founded and run by Sam Bankman-Fried had reached out for help amidst a liquidity crunch.

As the deal is still subject to due diligence, skeptics argue that it will fall through upon closer appraisal.

Doubters of the Deal

Adam Cochran, founding partner of Cinneamhain Ventures, reported multiple sources he trusted expressing a high chance of the deal failing. Although another trusted source of his affirmed the acquisition, he said that many more were expressing doubt.

Personally, he believes there’s an “85% [chance] that this goes to Chapter 11 [bankruptcy].” He said that Binance would “walk,” based on “the size of the hole, and concerns of regulatory risk.”

Others also shared concerns over FTX’s insolvency and the regulatory pressure the acquisition would bring. “You’re telling me CZ is going to want to acquire an insolvent exchange where he has to make things whole?,” said analyst Dylan LeClair. “I personally assign a ~10% chance that CZ follows through on the deal.” If Zhao does follow through, this would give Binance an 80% share of the global crypto market, according to Bernstein. This could subsequently draw the unwanted attention of antitrust regulators around the world.

Evidence that FTX Bailed Out Alameda

Analyst Lucas Nuzzi also revealed a transaction between Bankman-Fried’s Alameda Research and FTX that could potentially sink the deal. According to Nuzzi, over $8.6 billion worth of FTX tokens (FTT) was moved on-chain on Sept. 28. On closer inspection, he noticed “a peculiar transaction that interacted with a contract from the FTT ICO,” in which Alameda received some 173 million FTT, worth $4.19 billion.

While Nuzzi acknowledged the intrinsic connection between the two Bankman-Fried firms, a subsequent transaction stood out as suspicious to him. Upon receipt, Nuzzi said that Alemeda then sent the entire balance back to an address controlled by FTX. 

In summarizing what occurred, Nuzzi said he believed that Alameda had in fact failed in the second quarter. It would have joined the ranks of other high profile collapses, had it not been “able to secure funding from FTX using as ‘collateral’ the 172M FTT that was guaranteed to vest 4 months later.” This would strengthen the case of financial impropriety behind the scenes at Bankman-Fried’s firms.

Reactions and Regulatory Response

In response to the news of FTX’s liquidity crunch, the chief executive of US crypto exchange Coinbase weighed in. Brian Armstrong confirmed that Coinbase had no material exposure to either FTX or FTT. He chalked up the incident to “risky business practices, including conflicts of interest between deeply intertwined entities, and misuse of customer funds.”

Binance chief executive Zhao also offered some constructive criticism regarding the events that occurred. “Never use a token you created as capital,” he said. Second, he advised against borrowing “if you run a crypto business.” Zhao declared that “Binance has never used BNB for collateral, and we have never taken on debt.”

The leading Republican on the U.S. House of Representatives’ Financial Services Committee also used the occasion to call for regulation. Patrick McHenry said he has advocated for “a clear regulatory framework for the digital asset ecosystem, including trading platforms.” He added that these events demonstrated the necessity for such a framework more than ever.


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