FTX, one of the largest cryptocurrency exchanges with an $8 billion hole in its balance sheet, has officially filed for bankruptcy protection. In the meantime, Binance exchange, as one of FTX’s competitors, has played a role in this situation.
We are going to see in this article CEO of Binance How did it lead to such a big failure for FTX?
Prominent players in the cryptocurrency industry
Sam Bankman-Fried or SBF, founder and Former CEO of FTX And Changpeng Zhao or CZ, the founder of Binance, are considered the two main players in the digital currency industry and managed to launch and flourish two top exchanges within a few years. Digital currency have became.
Benkman Fried and Zhao were already business partners and involved in a multi-billion dollar industry together. During their partnership, they went through many ups and downs together and in many cases they cooperated very closely with each other; But their attitude is completely different from each other.
30-year-old Benkman Farid is the son of two Stanford University professors and a graduate of the Massachusetts Institute of Technology (MIT). So far, he has spent several million dollars on political affairs. He was once in the Capital Hill neighborhood during the leadership of a Legislative lobby He was present with prominent political figures such as Bill Clinton and Tony Blair.
In addition, he paid a significant amount for the name of his company to be chosen for the FTX Arena multi-purpose stadium in Miami, Florida, USA. His fortune was 16 billion dollars at the beginning of last week in America; But now a large part of this wealth has been lost.
Zhao, 45, was born in the coastal province of Jiangsu, north of Shanghai. At the age of 12, he immigrated to Canada with his father, who was a university professor, and is now a citizen of this country. After graduating from McGill University in Montreal with a computer degree, he started his career by working on programming systems for the Tokyo Bloomberg Stock Exchange and in 2017 he opened the Binance exchange.
He also gained a lot of wealth during his career, like Farid Bankman, and although he lost 79 billion this year, according to the information published by Bloomberg, he still has a wealth equal to 16.4 billion dollars, which may be affected by the collapse of FTX.
Let me continue with the most important events of the days before filing the application FTX Bankruptcy to examine
Wednesday, November 2 (November 11)
When the bad consequences of FTX’s financial crisis plagued the company, Zhao He was in Lisbon. At that time, the CEO of Binance attended the annual Web Summit event, which is one of the global gatherings of well-known people in the world of technology, as one of the speakers of the event. In his speech at the event, as always, he defended the long-term future of digital assets and said:
“I imagine the value of any asset is constantly fluctuating. The digital asset market is a trading market and its conditions are just like the stock market. If the value of stock market assets does not fluctuate, who is willing to invest in it?”
Zhao’s statement was a way of defending the constant fluctuation of digital currencies and considering such a phenomenon safe in a trading market.
After Zhao’s speech, cryptocurrency news agency CoinDesk made claims about trading balance sheets. Alameda Research (Alameda Research), a company owned by Benkman-Fried.
This news agency claimed that the Binance exchange plans to stop buying and selling in line with the decision FTT (FTX exclusive digital currency) in this exchange, to sell all the balance of this digital currency, and Alameda Research has proposed the purchase of all FTTs being sold by Binance.
Alameda Research has billions of dollars worth of FTT. Alameda Research uses this digital currency as a collateral to get more loans. This means that due to the joint ownership of Alameda Research and FTX, a decline in FTT’s value could lead to financial damage for both companies.
Friday, November 4 (November 13)
Following the publication of the said report by CoinDesk, an active researcher in the field of digital currency with the nickname “Dirty Bubble Media” (Dirty Bubble Media), published more claims about Alameda Research on the news website Substack. Substack had questioned whether Alameda Research was insolvent. Referring to the fact that part of FTT’s inventory is in the hands of Alameda Research, this website made a strange claim, the text of which is as follows:
“It almost seems as if Bankman-Fried, despite being able to borrow huge sums from his unknown partners, found a way to hack into the financial system and print billions of dollars in an unexpected move.”
Sunday, November 6 (November 15)
Zhao warned investors by tweeting on this date. The text of this tweet is as follows:
“Based on recent revelations, Binance has decided to stop trading the remaining balance of FTT currency. Apparently, the remaining balance of this digital currency was 5% of its liquidated balance on Binance worth 580 million dollars.
Binance invested in FTX as a shareholder in 2019; But last year it ended its investment in this exchange and in this deal received 2.1 billion dollars from FTX in the form of its stable digital currency BUSD as well as FTT.
The consequences of Binance’s termination of cooperation with FTX gradually became more serious, and Zhao published another tweet regarding this matter, the text of which is as follows:
“We are not against any person; But we do not support people who lobby against other players in the digital currency industry and behind their backs.”
A source close to Binance stated that the digital currency exchange had no ill will against FTX in its decision to stop trading FTT and sell its remaining balance.
By lobbyist, Zhao appears to be referring to Benkman-Fried, who has spent millions of dollars securing funding requested by US Democratic politicians and lobbying them for more covert cryptocurrency trading legislation in Washington.
Monday, November 7 (November 16)
In response to Zhao’s attempts to disturb the public, Benkman-Fried countered by publishing a few tweets and by publishing the following sentence impliedly claiming that the CEO of Binance is trying to incite against him:
“One of the competitors is trying to destroy us by spreading false rumors. “FTX is a good exchange and the assets on it are also good assets.”
He didn’t specify who exactly he meant, but he tagged Zhao, who he had already committed to Elon Musk To help buy Twitter 500 million dollars. In a tweet that he published with the aim of announcing help to Elon Musk, Zhao wrote as follows:
“I love Binance. We can work together to expand our ecosystem.”
Tuesday, November 8 (November 17)
On this date, the feud between the two seemed to be over, but Zhao announced his intention to buy FTX and save it. In his tweet that he posted to announce this news, he wrote as follows:
“This afternoon FTX asked us for help. This exchange has lost a lot of money and is unable to pay its debts. “We have signed an agreement with this exchange to support its users and we want to buy FTX in full.”
Bankman-Fried also confirmed this deal on Twitter and wrote in his tweet about this news:
“The situation has not changed, again the same investors who have already invested in FTX have entered. Our agreement with Binance is a strategic transaction.”
In the English text of this tweet, Benkman Farid used the two letters DD, which is the shortened form of the phrase “due diligence” meaning verification, and apparently this phrase is the most important phrase of his tweet; Because it seems that by using this phrase, Benkman-Fried wanted to implicitly show his doubts about the good intentions of Zhao.
Wednesday, November 9 (November 18)
As rumors grew that there was a severe lack of funds on FTX’s balance sheet, Zhao suddenly stopped the process of buying the exchange, leaving it in a major financial crisis. By publishing the following statement, Binance officially announced that it will no longer continue the actions related to the purchase of this exchange.
“Initially, we hoped to be able to support FTX customers by providing the necessary liquidity; But the current situation is beyond our control and we cannot help.”
“It was a bad day!” Zhao tweeted after the statement was released.
Thursday, November 10 (November 19)
FTX posted a tweet on this date that implied a desperate plea for help.
“Damn this situation, we should have done better. “The future of FTX is now seriously in doubt.”
Friday, November 11 (November 20)
On this date, FTX formally requested and filed for bankruptcy protection in the United States. In line with this request, FTX officials set up several offices for this exchange and also for Alameda in America.
After filing the FTX application, Bankman Farid was replaced by a lawyer named John Ray III.
A few hours before FTX bankruptcy filing, Zhao warned of the crypto market facing a severe crisis similar to the 2008 financial crisis, with negative consequences worse than those of that crisis. At a conference in Indonesia, he noted that the financial crisis is a good example to understand the dire situation of the digital currency market this week.
Of course, Benkman Farid is apparently trying to remain positive. After announcing the bankruptcy of his exchange on Twitter, he again apologized to the users of this exchange and wrote in his tweet:
“We hope to find a way to return and revive. We hope that declaring bankruptcy and apologizing to some extent has been able to clarify, build trust and try to control the situation.”