Binance chief says falling FTX going down ‘not good for anyone’, warns of increased regulatory scrutiny

Bankman-Fried’s purchase of Wabi on Tuesday was met with surprise not only in the business world but also within the crypto community, which has become accustomed to the unexpected this year. He has invested in a number of crypto startups including Aptos Labs, Messari, Sky Mavis, LayerZero, YugaLabs and 1inch Network. FTX Ventures, the ventures arm of the crypto exchange, is also a big investor in these companies.

Binance CEO Changpeng Zhao is concerned about the consequences of the FTX business going bankrupt, saying that it would be a “huge loss” for the industry. He also worries about the damage caused to consumers’ confidence in the cryptocurrency industry after the recent events on its largest rival platform, Binance.

According to Zhao, regulators around the world will be more likely to scrutinize crypto exchanges after the FTX liquidity crunch. He also warned his employees that people now believe FTX is the biggest and will attack us more, which he posted to Twitter.

FTT, the native token of FTX, has seen a 70% drop in value since Tuesday, now trading at about $4.8. The billionaire, widely considered the most powerful man in crypto, has asked the employees to not trade FTT, FTX’s token. “I asked our team to stop selling as an organisation. Yes, we have a bag. But that’s ok. More importantly, we need to hold ourselves to a higher standard than even in banks,” he wrote.

Binance revealed on Tuesday that it had signed a letter of intent to purchase the three-year-old firm FTX, delivering a shocking twist following the public feud between the world’s two largest crypto exchanges. Zhao said Bankman-Fried, the chief executive of three-year-old exchange FTX, contacted him and asked for help.

Binance, the world’s largest cryptocurrency exchange, invested in FTX, but as the firm grew in popularity, the relationship between the two began to deteriorate. The financial terms of the deal are unclear, but it is likely absolutely awful for FTX investors, which was valued at $32 billion in a financing round earlier this year.

Earlier this month, the relationship between the two executives reached an all-time low when Zhao said that Binance had sold its FTT holdings as part of an exit last year, after which they had been hurling snarky remarks at each other for several months.

Zhao said that Alameda Research was liquidating its FTT holdings as a “post-exit risk management,” lending credence to a widespread rumor about Alameda’s financial health. Bankman-Fried and Alameda had previously denied such concerns.

Binance Co-Founder Binance did not “create this” or “anything to do with it,” and warned employees it should not be viewed as a “victory.”

“The last time I spoke to SBF was less than 24 hours ago,” Zhao said. “Before that, I had very little knowledge about the internal state of things at FTX. I was able to make mental calculations based on revenue figures, but it would never be entirely accurate. He contacted me.”

The value of Binance, the world’s most significant cryptocurrency exchange, is estimated to be $300 billion. In January this year, FTX raised $32 billion (a Series C) as the world’s most valuable cryptocurrency exchange. Sequoia, BlackRock, Tiger Global, Paradigm, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Lightspeed Venture Partners, Altimeter Capital, Coinbase Ventures, Sino Global, Bond, and Iconiq Growth are among FTX’s long list of backers. FTX and its FTX US business raised over $2.2 billion across several funding rounds according to Web3 Signals, a crypto dealbook.

Bankman-Fried’s announcement Tuesday came as a shock to the business world and even the crypto community, which has become accustomed to ups and downs this year. He bought a series of troubled firms earlier this year and has also invested heavily in a variety of crypto ventures, including Aptos Labs, Messari, Sky Mavis, LayerZero, YugaLabs and 1inch Network.