• Bankman-Fried was not at a loss to criticize Zhao
• FTX takeover drama ends in bankruptcy
• Quarreling was “not a good strategic move”
Zoff between Sam Bankman-Fried and Changpeng “CZ” Zhao
For a long time, Sam Bankman-Fried, also known as SBF, and Changpeng “CZ” Zhao have been stars in the crypto scene. Bankman-Fried founded crypto exchange FTX in 2019, and Zhao laid the foundation for his crypto trading platform Binance about a year earlier. In 2019, Binance even invested in Bankman-Fried’s rival. Gradually, however, the fronts between crypto entrepreneurs hardened. The FTX founder has repeatedly used his notoriety to influence the regulation of Bitcoin & Co. before the US Congress in Washington, DC, which Zhao apparently resented. According to reports in the “New York Times”, the crypto mouthpiece repeatedly shot at the Binance boss in private meetings. According to the Australian medium “news.com.au”, the FTX founder boasted in October of his good relationships with politicians and regulators. In a Twitter post, he tagged Zhao and wrote, “I’m looking forward to him representing the industry in DC in the future! He still gets to go to DC, right?”. The tweet has since been deleted.
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Liquidity issues on FTX
The ridicule of his competitor is likely to have been Bankman-Fried’s undoing. At the beginning of November, liquidity problems at the 30-year-old’s crypto trading platform became known. The empire of the then crypto billionaire is said to have been divided into the FTX stock exchange and the trading company Alameda Research. After the prices of Bitcoin, Ether and Co. fell significantly this year, Alameda probably borrowed money and siphoned off the deposits of FTX customers to meet immediate debt obligations. When these allegations came to light, FTX clients withdrew their holdings from the platform in a big way.
Binance is dumping FTT tokens
Earlier this month, Zhao still held some units of the FTT token, FTX’s own cryptocurrency, from his investment in 2019. On November 6, 2022, the Binance boss then declared via Twitter that he was now also selling his remaining shares in the coins, which further fueled the panic among FTX customers. As Zhao wrote on Twitter, this is all about “risk management” as lessons have been learned from the LUNA stablecoin debacle. “We have provided support before, but we will not pretend to give love after the breakup,” the Binance CEO said. “We are not against anyone. But we will not support people who lobby against other industry players behind their backs.”
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.
– CZ ? Binance (@cz_binance) November 6, 2022
Shortly thereafter, Caroline Ellison, CEO of Alameda Research, stated that Bankman-Fried’s trading firm would buy the tokens from Zhao at $22 each. Two days later, the price of the FTX coins dropped below $22.
Binance wants to take over FTX – and then backs out
“This afternoon, FTX asked for our help. There is a significant liquidity squeeze,” Zhao wrote on Twitter. Shortly thereafter, on November 8, 2022, the Binance boss then published a non-binding letter of intent to buy FTX. Just one day later, the competitor canceled the deal again. “As a result of the company’s due diligence, as well as recent news reports regarding misallocated customer funds and alleged investigations by the US authorities, we have decided that we will not pursue the potential acquisition of FTX.com,” a company spokesman told ” CoinDesk”. According to the New York Times, Zhao Bankman-Fried is said to have given the rejection in a group chat on the WhatsApp alternative Signal. “Sam, I’m sorry,” it said, “but we won’t be able to continue this deal. Far too many problems. CZ.” Then everything happened very quickly: first FTX assets were frozen in the Bahamas, then FTX filed for bankruptcy in the USA.
Bankman-Fried admits he got the tone wrong
Could FTX possibly have been saved had Bankman-Fried spoken more thoughtfully about his competitor? In retrospect, the FTX boss regrets the dispute with his rival, as he admitted to the New York Times. The criticism of Zhao was “not a good strategic move”. “I was quite frustrated with a lot of what I saw, but I should have understood that it wasn’t a good decision on my part to express it,” the ex-crypto giant told the paper.
Zhao calls Bankman-Fried a liar
The two crypto entrepreneurs don’t appear to have completely buried the hatchet just yet. After Binance announced a fund to benefit the struggling crypto industry, the question arose whether FTX could benefit as well, news.com.au reported. “Liars or cheating never qualify as strong projects,” Zhao then shot at the bankrupt competitor. In a question and answer session, the platform’s founder was even more explicit: “I think Sam lied to his employees, his users, his shareholders and regulators around the world.” So it remains to be seen whether the two quarreling crypto entrepreneurs will get closer again soon or whether the fight SBF vs. CZ will go into the next round.
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