Crypto market extends losses as Binance drops FTX takeover offer

The news that Binance withdrew its offer sent bitcoin to its lowest level since November 2020.

Changpeng Zhao walked away from his bailout of Sam Bankman-Fried’s FTX.com almost as quickly as he offered a rescue, leaving the fate of the beleaguered exchange and his onetime chief rival uncertain.

“Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement.

A FTX spokesperson declined to comment.

The news caused the crypto market to extend this week’s rout. Bitcoin, the largest token by market value, fell as much as 14% to $16,109 on Wednesday, its lowest level since November 2020. That brings this week’s decline to more than 20%. Bitcoin reached a record high of almost $69,000 a year ago. Just about every digital coin was struggling Wednesday: Ether, Solana, Polkadot and Avalanche all dropped.

It became evident in a matter of hours that rescuing FTX would be a tall order for Binance. Its executives found themselves staring into a financial black hole — a gap between liabilities and assets at FTX that’s probably in the billions, and possibly more than $6 billion, according to a person familiar with the matter.

On top of that, U.S. regulators are circling FTX, investigating whether the firm properly handled customer funds, as well as its relationship with other parts of Bankman-Fried’s crypto empire, including his trading house Alameda Research, Bloomberg News reported Wednesday.

Zhao himself admitted there was no “master plan” to take over FTX.

“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 FTX.com,” Binance said in the statement.

For crypto investors, the stakes are high for what happens next. The downfall of Bankman-Fried, the industry’s 30-year-old wunderkind, has cast doubt about which institutions are safe in the still loosely regulated market.

While Bankman-Fried is barely a billionaire anymore, Zhao remains the richest person in crypto, with a fortune estimated at $16.4 billion by the Bloomberg Billionaires Index. But even Zhao hasn’t been immune to tumbling crypto prices: His net worth peaked at $97 billion in January.

Coinbase Chief Executive Brian Armstrong said Tuesday in a Bloomberg TV interview that if the deal with Binance fell through, it would likely mean FTX customers would take losses.

“That’s a not a good thing for anybody,” he said.