Nov. 9 (UPI) — Binance pulled out of its proposed deal to purchase competitor FTX Wednesday just days after announcing its intentions to acquire the struggling company.
Binance, the world’s largest cryptocurrency exchange, canceled its plan to acquire FTX after discovering “”mishandled customer funds and alleged US agency investigations,” CNBC reported. FTX faces an estimated $8 billion shortfall and has warned investors of potential bankruptcy, according to the Wall Street Journal.
Binance CEO Changpeng Zhao said his company would acquire FTX over the weekend, with the intention of liquidating its holdings in FTX. FTX founder Sam Bankman-Fried would have needed $580 million in capital if this were to happen, something he would not have been able to do.
Though Binance and FTX are competitors, Zhao told employees that the collapse of FTX is not good for anyone in the industry. In an internal message Zhao later shared to the public Wednesday, he said, “We did not master plan this or anything related to it. It was less than 24 hours ago that SBF (Bankman-Fried) called me. And before that, I had very little knowledge of the internal state of things at FTX.”
Zhao also advised employees not to buy or trade FTT, the currency used by FTX.
Binance and FTX had a non-binding deal in place as of Tuesday for an undisclosed amount. FTX’s value early in the year was about $32 billion, but has dropped sharply.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance tweeted. “But the issues are beyond our control or ability to help.”
The value of FTT has plummeted in the past few days, falling by 80% from Monday to Tuesday. That is a loss of about $2 billion in one day. After falling to $5 on Tuesday, FTT reached a value of $2.30 on Wednesday.
Bankman-Fried told investors that FTT traders were requesting up to $6 billion in withdrawals, CNBC reported. FTX’s website has a message on its main page telling users it is unable to process withdrawals and warning against making deposits.
FTT is not the only cryptocurrency suffering from a weakening market. Bitcoin and Ethereum have also lost value since the announcement of Binance pulling out of its deal with FTX. Bitcoin’s current value is the lowest it has been in two years, according to CNN.