Binance Goes on the Offensive With FTX Insolvency Rumors
The war between crypto exchanges for global domination is heating up, as Binance (BNB-USD) is proving today. The blue-chip exchange, which processes the brunt of the world’s crypto transactions, is capitalizing on a close rival’s controversy in order to bring attention to itself.
In the last week, FTX has been dealing with the fallout related to CoinDesk’s report on the company’s sibling entity’s balance sheet. Alameda Research, another company founded by FTX CEO Sam Bankman-Fried, counts nearly $6 billion of FTX’s flagship FTX Token (FTT-USD) among the $14.6 billion balance sheet. The news is leading to a fair bit of scrutiny, seeing as the companies are very close to one another; Alameda relying so heavily on a token controlled and produced entirely by its sibling is much more unusual than primarily holding an unrelated asset or fiat.
It’s a blow to the American companies, which have been on quite a tear throughout the crypto bear market. FTX is shrugging off the market volatility by making its own aggressive bailout investments. Atop bailing out the struggling BlockFi with a $240 million deal, it also acquired the rights to bankrupt Voyager Digital’s remaining assets.
Alameda, meanwhile, has been working to help embattled companies to keep them afloat. Before FTX bought Voyager’s assets, Alameda Research returned a $200 million loan to the company to help it free up some liquidity. The company also offered to extend a $500 million line of credit to the company; though, this offer was shot down.
It’s worth noting that Binance CEO Changpeng Zhao had been highly critical of both Alameda’s offers. His company also heavily criticized the Voyager Digital auction, implying the court gave FTX an advantage over Binance’s bid by complicating its own bidding process with extra fees.
Binance Leverages FTX Controversy by Liquidating FTX Token Holdings
The Alameda Research and FTX news is a bad look for the company, which is trying to compete with the likes of Binance and make itself the king of crypto exchanges. Changpeng Zhao, meanwhile, is taking advantage of the controversy to make his own company look better.
Shortly after CoinDesk revealed the scope of Alameda’s FTT exposure, Changpeng Zhao tweeted that Binance will be liquidated the entirety of its FTT holdings.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
Zhao remains clear that Binance does not intend to damage FTX and Alameda Research. Rather, he says the move is simply to reduce Binance’s exposure to the crypto now that they have a more transparent look into the concentration of Alameda’s FTT holdings. He adds that the company expects the liquidation to take “a few months to complete” due to “limited liquidity” and market conditions.
FTX and Alameda founder Sam Bankman-Fried is not taking Zhao’s comments as simple transparency. Bankman-Fried, while not naming Zhao directly, has tweeted about a competitor he believes to be “trying to go after us with false rumors.” He also goes after these “limited liquidity” rumors by saying that the company has enough money (about $1 billion on-hand, specifically) to cover all holdings and process all withdrawals. Alameda Research CEO Caroline Ellison added to the conversation with her own tweet, offering to buy Binance’s FTT at market rates.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.