Wednesday, June 7, 2023

Binance Unlikely To Go Through With FTX Purchase

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The Binance-FTX drama continues as the deal between the parties hangs by a thread. Yesterday, FTX announced a deal with its competitor to surrender its assets amid a “liquidity crunch.” The crypto exchange has billions of dollars in losses on its balance sheet. 

The Changpeng “CZ” Zhao-led platform clarified that it could walk out of the agreement anytime. Per a report from CoinDesk, Binance might back out of the deal after reviewing FTX’s books. This decision would be the worst-case scenario for the industry. 

BNB’s price trends to the downside on the daily chart. Source: BNBUSDT Tradingview

Binance Can’t Bailout FTX, How Big Are Its Losses?

The report claims that Binance spent a day reviewing its competitor’s books. The losses on FTX’s balance sheet might be too large for the CZ-led company to cover, making it “highly unlikely” that they can go through with the non-binding agreement. 

CoinDesk cites a person familiar with the deal. Binance has reviewed FTX’s books, as mentioned, its internal data, and loan commitments. In this context, the report claims Binance is “strongly leaning against completing the transaction.” 

Media outlets reported FTX’s losses and debts at around $6 billion. This figure might be too much to fill even by Binance’s standards. Analyst Dylan LeClair believes this outcome “should surprise no one.” LeClair said: 

I personally assign a ~10% chance that CZ follows through on the deal. Even if I was sitting on $10b liquid, you couldn’t PAY me to acquire this dumpster fire. You’re telling me CZ is going to want to acquire an insolvent exchange where he has to make things whole? Sure.

As Bitcoinist reported, FTX halted new withdrawal requests from users. This pause in operations has led many, including big players and institutions, with millions stuck on the platforms. LeClair believes these users should consider themselves at a loss:

Don’t mean to be the bearer of bad news here, but if it isn’t clear already, if you still have funds on FTX, they’re gone. You’re an unsecured creditor. The probable outcome is Chapter 11 & a class action lawsuit that draws out for years, where you get $0.10-$0.30 on the dollar (…). I’d be happy to be wrong here. Hoping for the best for all users involved.

There is no official statement from Binance or CZ on the deal. Until there is, and especially during these times of uncertainty, users should take everything with a grain of salt. 



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