How crypto giant Binance came to bail out its biggest rival, FTX, days after their billionaire founders got into a very public spat on Twitter
- The CEO of Binance tweeted on Sunday the exchange would be liquidating all its FTT tokens due to "recent revelations."
- On Monday, FTX head Bankman-Fried tweeted "a competitor is trying to go after us with false rumors."
Sam Bankman-Fried stunned the crypto world on Tuesday when he announced his exchange FTX is to be acquired by rival Binance.
But drama was brewing in the background, as the founders of the two exchanges appeared to be feuding over Twitter, just hours before the deal was announced by FTX CEO Bankman-Fried in a tweet on Tuesday.
Bankman-Fried and Binance CEO Changpeng "CZ" Zhao have publicly traded barbs on Twitter in recent months over issues like political lobbying and front-running trades, per Bloomberg. Front-running means trading a financial asset by a broker who has inside knowledge of a future transaction which may affect the asset's price.
The most recent brawl started on Sunday when Zhao tweeted Binance would be liquidating all its FTT tokens — a crypto token native to FTX — due to "recent revelations."
Binance invested in FTX in December 2019, but sold an unspecified stake last year, receiving Binance USD stablecoin and FTT tokens in return.
Zhao didn't specify the concerns he had, but a November 2 CoinDesk report had been stoking market fears about FTX's liquidity position, at a time when some smaller crypto exchanges suspended withdrawals to users, amid a crypto winter.
Bankman-Fried appeared to hit back at Zhao on Monday, tweeting: "a competitor is trying to go after us with false rumors," per media reports including Bloomberg and Reuters.
"FTX is fine. Assets are fine," he added. This tweet appears to have been deleted.
But the damage had been done and the tiff weighed on market sentiment, sparking a selloff and a rush for withdrawals. At FTX, about $6 billion was withdrawn in 72 hours before Tuesday morning, Reuters reported, citing a message Bankman-Fried sent to staff.
This may have spurred a change of heart, and Bankman-Fried tagged Zhao in a tweet on Monday saying, "I'd love it, @cz_binance, if we could work together for the ecosystem." This tweet also appears to have been deleted.
On Tuesday, both Bankman-Fried and Zhao appeared to have made up. The former announced the deal with Binance, and Zhao said Binance "signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch."
Despite the drama, Zhao said he wasn't feuding with Bankman-Fried. "Sorry to disappoint, but I spend my energy building, not fighting," he tweeted on Tuesday.
Alarm bells had been ringing since Sunday, however, and prices of cryptocurrencies — like Bitcoin — seesawed over the changing dynamics between the two founders.
Bitcoin and most other cryptocurrencies fell Tuesday following Binance's announcement of the acquisition, as the deal stoked fears about the industry's state of liquidity. As of 12.36 p.m. ET, Bitcoin was down by around 6% over the last 24 hours while Ether was down around 10% in the same period, according to CoinMarketCap, extending a crypto slump this year.
The drop in crypto prices sent Zhao's net worth down 10.5% in a day, to $16.4 billion on Wednesday according to the Bloomberg Billionaires Index. His net worth is down 83% so far this year.
Binance referred to Zhao's tweets in response to a request from Insider for comment. FTX did not immediately respond to Insider's request for comment sent outside regular business hours, but referred Insider to Bankman-Fried's tweets for an earlier report on the deal.