Changpeng Zhao, the CEO of Binance, also recognized as “CZ,” tried to warn users that the company’s intention to procure FTX may attract scrutiny from global regulators — but the firm is ready.
We previously stated in our exclusive article that Binance appears to have planned to sell FTT tokens on open markets to depress FTT prices and FTX’s market share. This opens the door to more market dumping and lower acquisition prices. And now Binance has backed out from its decision to acquire FTX.
Is the regulatory scrutiny responsible for the failed FTX deal?
CZ said in a letter to Binance staff on Nov. 9 that while the agreement to procure another significant crypto exchange continued to be in the functions, regulators would probably “thoroughly investigate exchanges even more” and make acquiring operating licenses more complicated. He appended that if the deal induces FTX to collapse, it would be a failure for the crypto industry instead of a “win” for Binance.
The last two days have been messy for both cryptocurrency exchanges and cryptocurrency prices. After declaring on Tuesday that Binance had signed a letter of intent to procure FTX, Zhao declared on Wednesday that the agreement would be nixed due to “corporate investigative work, as well as the recent news reports concerning mismanaged client money and purported US agency inquiry.”
Binance and CZ are now under the microscope if they weren’t already. If they are engaging in questionable behavior, which is highly likely, this is not the end.
When Zhao announced that Binance would be liquidating all of their FTT, the FTX native token, on their books, the pullback took a sharp turn. As a consequence, this statement expressed doubts about the platform. Although the decision was construed adversely, Zhao has tried to insist that this was not the situation.
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.— Binance (@binance) November 9, 2022
The crypto community was shocked to learn that Binance had backed out of the deal. The reasoning behind this rationale was that Binance’s due diligence on FTX revealed that the company mishandled its customers’ deposits. This is a major red flag for most crypto exchanges, not just FTX. This trend can now actually occur to anyone, and regulators are all on high alert.
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