About 24 hours following the announcement of a tentative agreement (TA), the largest cryptocurrency exchange company (in terms of trade volume), Binance, revealed in a tweet on Wednesday that it is backing out from the acquisition of rival digital currency firm, the Bahamian cryptocurrency exchange, FTX.
In response to a report claiming that federal investigators have been inquiring how FTX handled customer payments, the firm tweeted that the agreement fell through in the corporate due diligence (DD) phase.
The about-face is a further significant market disruptor inside a more unstable sector. Worries regarding the financial stability of numerous businesses, whose digital assets have seen a dramatic decline in value in the past couple of months, have led to the merger of 2 of the major cryptocurrency platforms globally.
Binance stated that they have chosen to back out from acquiring FTX in light of the corporate due diligence (DD) and the most recent press reports alleging mismanaged client monies and suspected United States agency investigations.
The turnaround casts uncertainty on the fate of FTX, which was previously among the most well-known and valuable businesses in the cryptocurrency sector. According to reports that have come out, the firm had a 32 Billion US Dollar private valuation early this year and may potentially be in financial trouble.
In an internal letter early on Wednesday, Changpeng Zhao, the co-founder and Chief Executive Officer (CEO) of Binance, informed staff members that the transaction was not a part of a corporate strategy of Binance. Furthermore, he cautioned his staff that the collapse of FTX might spread to the rest of the 1 Trillion US Dollar digital asset market, raising cryptocurrency price volatility and prompting a regulatory crackdown upon cryptocurrency companies.
According to reports that cited an internal staff letter from Sam Bankman-Fried, one of the founders and the Chief Executive Officer (CEO) of Binance, customers withdrew around 6 Billion US dollars from FTX in the 72 hours before the company paused withdrawals. Since news of FTX’s financial difficulties broke, the price of Bitcoin (BTC) has fallen by around 16 percent, too little under 16,000 US dollars, over the previous week.