The letter of intent that Binance signed with FTX was non-binding, which meant that Binance could withdraw from the deal at any point. After a review of FTX’s structure and books, the company backed out of the deal citing news reports of mishandled customer funds and alleged US agency investigations.
Binance officials cited by techcrunch.com emphasised that FTX’s issues are beyond their control or ability to help. The same officials also stated that every time a major player in an industry fails, retail consumers end up suffering, and they expressed their hope that outliers that misuse user funds will be removed by the free market in the future.
According to FTX officials cited by the Wall Street Journal, FTX extended loans to its corporate relative Alameda Research using money that customers had deposited on the exchange for trading purposes. According to the same source, Alameda owes FTX around USD 10 billion, but it also owes money to other parties outside of FTX.
After it was hit with USD 5 billion worth of withdrawal requests, FTX paused customer withdrawals, and the company caught the eye of the Securities Commission of the Bahamas shortly after. The commission froze the assets of FTX Digital Markets Ltd, the Bahamian subsidiary of FTX and revealed that it appointed a provisional liquidator for the case.
According to Tether officials cited by cointelegraph.com, the company does not have any plans to invest or lend money to FTX or Alameda. According to the same source, the stablecoin issuer has frozen 46,360,701 Tether owned by FTX in its Tron blockchain wallet in order to comply with law enforcement.
FTX CEO Sam Bankman-Fried reached out to several companies in order to ask for help, including crypto exchange OKX and venture capital firm Sequoia Capital. On 9 November 2022, Tether’s chief technology officer assured the community that Tether has no exposure to Alameda or FTX and will not be affected by recent events.
As for Kraken, Axios reports that FTX has approached the US-based crypto exchange about a potential deal, but it’s not clear whether FTX is seeking acquisition or something more in line with a large loan in order to get through these difficult times.
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