FTX’s demise comes at a time when the crypto industry is bleeding billions and investor faith is at an all-time low. FTX was no exception. Facing an acute liquidity crisis, the company reached out to its arch-rival with an acquisition offer to rescue the sinking ship. However, once it came to public knowledge that FTX will be facing regulatory scrutiny over allegations of mishandling customer funds, Binance pulled out of the deal.
Interestingly, Binance was among the early backers of FTX and its CEO Changpeng Zhao — also known as CZ — personally invested $100 million in the company. But as the relations between the two crypto companies and their respective CEOs soured due to competition, Bankman-Fried bought back Zhao’s stake for over a billion dollars, reports Reuters based on information received from insider sources.
With the Binance deal falling apart,Bankman-Fried told investors that FTX was staring at bankruptcy unless he gets a cash infusion as big as $8 billion. That apparently didn’t happen, and just as industry watchers had prophesized, FTX group has filed for bankruptcy as the last viable recourse.
As for customers, FTX had paused withdrawals earlier this month and even warned customers from making deposits. How exactly is FTX going to return the investment to concerned customers and what entails for Bankman-Fried’s future will become clear once the bankruptcy proceedings conclude and the investigations are over.