It's been a turbulent few days in the highly unregulated cryptocurrency sector, with mudslinging on Twitter, a surprise exchange takeover offer that then collapsed, and token values plummeting.
Similarly, Binance Holdings Ltd., the world's leading crypto exchange, was set to purchase struggling rival FTX on November 9. However, Binance called off the acquisition deal on Wednesday. Its decision to withdraw exacerbated the ongoing crypto bear market, pushing Solana and Bitcoin to their lowest level in two years.
While cryptocurrency may appear to be a niche sector of finance, the saga between two of its top players has upended the crypto ecosystem and is likely to have far-reaching consequences.
Why did Binance Back Off?
On November 9, an American media outlet reported that the US SEC and CFTC are investigating whether the FTX exchange mishandled funds or not, as well as its connection with FTX US and Alameda Research.
The announcement might be the primary reason for Binance to back off from the acquisition deal. As a result, on November 9 mid-night, Binance CEO CZ tweeted:
“We have decided not to pursue the potential acquisition of FTX as a result of corporate due diligence and the latest media reports alleging mismanaged client funds and suspected US agency investigations.”
Binance then stated that it wanted to assist FTX's consumers but that "the difficulties are beyond our control or ability to assist." The exchange also stated that if a major crypto business fails, regular investors suffer. "We've witnessed over the previous several years that the crypto ecosystem is getting more resilient, and we believe that over time, outliers who misappropriate user funds will be weeded out by the free market," Binance added.
The exchange concluded by stating that the ecosystem will benefit from stronger "regulatory frameworks" and "more decentralization." Following the announcement of the back-off, the broader crypto market plummeted dramatically.
