Crypto appears headed for some very dark times...
Binance says it will walk away from an offer to acquire beleaguered rival FTX, after discovering the company’s books were in complete shambles.
Catch up: Binance offered to buy FTX on Tuesday, after what amounted to a bank run threatened the solvency of the company (we wrote about this yesterday).
- The company signed a non-binding agreement to acquire FTX to solve its liquidity issues, but walked away after finding an $8B “financial black hole."
- Regulators are also looking into FTX’s handling of customer funds and its relationship with a hedge fund owned by founder Sam Bankman-Fried.
Why it matters: “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,” per Bloomberg.
- The implosion of one of the most trusted crypto brands–which attracted funding from top-shelf investors like the Ontario Teachers Pension Plan–will likely destroy the credibility of the sector for a long time.
- Without a buyer to rescue the company, FTX customers will likely take losses on their deposits, Coinbase CEO Brian Armstrong told Bloomberg.
What’s next: It’s still possible that a deep-pocketed saviour could come along to bail out FTX and rescue its customers, but Binance was the most likely candidate to do that, and they're now out of the picture—in other words, it’s looking bad.