Binance CEO Allegedly Rejected Ex-FTX Chief's $40M Future Crypto Proposal
Summary:
Changpeng Zhao, CEO of Binance, allegedly rejected a proposed $40 million funding for a future crypto exchange by ex-FTX CEO Sam Bankman Fried in 2019, according to Michael Lewis' book "Going Infinite." The book details differing goals of Binance and FTX at the time, with Binance focusing on retail customers, and FTX targeting institutional investors. In 2021, Binance again declined FTX's proposal for acquisition amid a liquidity crisis. This revelation comes as the former FTX CEO faces a fraud and money laundering trial tied to the collapse of the FTX exchange.
Changpeng Zhao, Binance's CEO, allegedly refused to provide $40 million to ex-FTX chief, Sam Bankman Fried, for a prospective crypto futures exchange back in March 2019, a claim surfacing from Michael Lewis' book, "Going Infinite." The book reveals that Sam put forth a concept of a futures exchange, possessing no risk for any losses arising from significantly leveraged failed trades. Commonly, these exchanges let traders back funds with minor collateral and often have traders increase this collateral if trades start to falter. Given crypto's significant and rapid price shifts, exchanges might be left with problematic debts due to insufficient collateral. Nevertheless, FTX aimed to develop a futures exchange that would continually monitor trader's activities, liquidating user positions once they exceeded the collateral, thus minimizing potential loss for the exchange.
During 2019, the book suggests that Binance and FTX pursued contrasting goals; FTX aimed to serve institutional investors, while Binance targeted retail customers. Consequently, after a few weeks of consideration, Changpeng Zhao (CZ), decided against funding Sam's request, instead opting to develop an in-house futures platform.
The author of the book purports that Sam didn't react well to CZ's choice, reportedly attributing CZ as being insensitive due to his decision. Despite Binance's rejection, FTX continued to construct its own futures exchange in 2019, though doubts about its potential success remained. The book quotes: "If it proves fruitful, it'd be worth billions of dollars, yet I was suspicious it may prove unsuccessful. I'd never marketed anything. I'd never had any interaction with the press or had any customers. It was utterly distinct from my prior experiences."
There have been other instances where the paths of Sam and CZ have crossed concerning shared business decisions. Notably, in 2021, FTX reached out to Binance for a potential buyout amidst a liquidity crisis but was again rebuffed by CZ, who believed the platform was beyond any repair.
Related: Latest update — Trial of former FTX CEO Sam Bankman-Fried commences [Day 1]
This claim emerges at the onset of the fraud and money laundering trial for the former FTX CEO, linked with the breakdown of the FTX exchange. The court trial commenced on October 3rd.
Magazine: Is trusting crypto exchanges still advisable following FTX's downfall?
Published At
10/4/2023 12:56:41 PM
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