Recall that the FTX crisis began rapidly gaining momentum on November 6 when Zhao announced the liquidation of FTT tokens from reserves Binance because of the leaked online report on the financial problems of the trading company Alameda Research, which was founded by Sam Bankman-Fried and is still closely associated with him. This led to a record outflow of customer funds from FTX and exposed numerous problems with the company's financial position.

It all ended up with the FTX Group filing for bankruptcy. At the moment, some in the blockchain industry are in crisis because of their close association with the exchange. In particular, blockchain platform BlockFi is tentatively preparing for bankruptcy.

How the FTX crypto exchange collapsed

According to Decrypt’s sources, after realising the scale of the problem, FTX’s founder later approached Zhao personally with an offer out of desperation. Here’s how the head of Binance commented on it.

“When Bankman-Fried contacted me, I thought he was going to ask for an OTC deal to buy FTT tokens and that way we would sort of drown out the noise in the market. But when he called me, he hinted very quickly that they were in big trouble. They are looking to buy out the company.

Mind you, at first Binance did indeed allow for the option of a buyout of FTX. However, the situation eventually came to a standstill. Initially, Binance representatives made it clear that they would only agree to a buyout if they bought the American division of FTX. A little later it became clear that the deal would not happen. Firstly, employees of Binance were convinced of FTX serious financial problems. Secondly, financial regulators such as Securities and Exchange Commission started to pay attention to FTX situation. Naturally, this did not satisfy Binance's management, so they decided to abandon the deal.

Binance CEO Changpen Zhao

On November 10, when FTX’s problems had already become public, Bancman-Fried posted the following message on Twitter.

At some point I could have shared more details about a particular sparring partner, so to speak. But you know, the earth is round. So all I’ll say now is this: well played, you win.

Most in the blockchain community agreed that Bankman-Fried was alluding here to Zhao "beating" a competitor. However, this now seems strange, as it was Sam, and not anyone else, who carried out the illegal transactions with user funds.

Bankman-Fried’s tweet

When Zhao was asked to respond to this tweet during the conference, the head of Binance left the following comment.

I think only a psychopath would write a tweet like that. He [Bankman-Fried] never told me I was his sparring partner. In fact, I’m not sure it could have been about me at all.

Zhao said that neither he nor Binance views other exchanges as competitors. He said takeovers are not as effective as trying to develop an industry that is still nascent.

We haven’t even reached 1 per cent adoption. We can grow the industry a hundredfold.

The collapse of the FTT token

Zhao then further emphasised that FTX should have been trying to “develop the industry rather than lobbying against other players”. That said, Bankman-Fried himself should have paid more attention to solving critical problems rather than tweeting outlandish messages.

Again, the bizarre deals by Alameda and the unwarranted loans from FTX on users' money were carried out by the management of these companies. Changpen Zhao in this case essentially just exposed the problem and spared the industry from such Sam activity. Perhaps if it hadn't happened now, the scale of the impact of such a debacle on the niche would have been even greater in the future.

FTX founder Sam Bankman-Fried


We think Sam Bankman-Fried's tweet does look as bizarre as possible. Still, such a post suggests some sort of rivalry and action by Changpen Zhao to eliminate a competitor. And while the Binance executive did precipitate problems for FTX with his decision to drain FTT, the original source of the latter was still Sam and his association with Alameda. Obviously, if he had not used user funds in a prohibited manner and had not transferred most of the exchange's assets to Alameda, there would have been no liquidity problems with the massive withdrawals from FTX. So the question of the guilty party here remains quite transparent - and quite closed.


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