Binance, the world’s biggest cryptocurrency platform, said in an abrupt reversal Wednesday that it was scrapping plans to acquire rival FTX.com, citing reports of mishandled customer funds and alleged government probes.
The development is a further blow to FTX founder Sam Bankman-Fried who is considered a cryptocurrency wunderkind, but has suffered a spectacular reversal of fortune.
Binance is owned by Changpeng Zhao, a onetime bitter rival of Bankman-Fried’s who accused FTX.com of being insolvent before offering to come to the rescue on Tuesday.
“We have decided that we will not pursue the potential acquisition of FTX.com,” Binance said on Twitter a day after disclosing it signed a non-binding letter of intent to buy FTX.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” the company tweeted.
The company also mentioned recent press reports about mismanagement of client funds and investigations by US regulators.
Doubts had been growing about the financial stability of FTX despite Bankman-Fried’s good standing in Washington as a public face of crypto investing.
Attention has focused on the relationship between FTX and Alameda Research, a trading house also owned by Bankman-Fried that was taken down from the internet on Wednesday, reports said.
Zhao on Tuesday said his group had signed a non-binding letter of intent “to fully acquire FTX.com”, which is suffering from “a significant liquidity crunch”.
Bitcoin and other cryptocurrencies continued to slump on Wednesday on fallout from FTX’s woes.
The crypto industry is still licking its wounds since so-called stablecoin TerraUSD and a linked token, Luna, collapsed in May this year, knocking tens of billions of nominative value off the market.
The slump for bitcoin meanwhile comes after recent strong gains for the world’s leading cryptocurrency.
There are currently more than 10,000 cryptocurrencies following the creation of bitcoin in 2008. (AFP)