Binance CEO Turns Down $40 Million Offer to Create Crypto Futures Exchange
In March 2019, Binance CEO Changpeng “CZ” Zhao declined a $40 million offer from former FTX CEO Sam Bankman-Fried to create a crypto futures exchange, as revealed in Michael Lewis’ book “Going Infinite.” At the time, Binance was primarily a spot crypto exchange and the idea of a futures-only exchange was a departure from its model. However, Zhao chose to develop a futures exchange in-house instead of accepting Bankman-Fried’s offer.
Bankman-Fried Creates FTX Exchange
After being turned down by Zhao, Bankman-Fried went on to establish the now-infamous FTX exchange in May 2019. However, the exchange faced financial difficulties and eventually filed for bankruptcy in November 2022. The collapse of FTX has led to Bankman-Fried’s ongoing criminal trial in New York.
Zhao’s Decision Disappoints Bankman-Fried
Bankman-Fried considered Zhao’s decision not to accept his offer as “ordinary and vaguely disappointing.” He described Zhao as “kind of a douche but not worse than a douche.” Despite this, Bankman-Fried acknowledged that Zhao should have been a great character but fell short of expectations.
The Advantages of Futures Exchanges
Futures exchanges differ from traditional spot exchanges as they allow traders to trade crypto using only a portion of their collateral. This feature provides leverage and potential for higher returns but also carries increased risk.
The Pitch for a Crypto Futures Exchange
Bankman-Fried had been considering the idea of creating a crypto futures exchange but faced challenges in getting started and attracting customers. He attempted to launch a bitcoin exchange called CryptonBTC in 2018 but struggled to promote it. Bankman-Fried then started pitching existing crypto exchanges, with Zhao being the most likely buyer in his mind.
FTX Token and Funding
To fund the development of FTX, Bankman-Fried introduced the FTX token (FTT) that promised holders a share of FTX’s annual revenues. This move was inspired by Binance’s successful use of similar tokens. Despite regulatory challenges, FTX minted 350 million FTT tokens in May 2019 and listed them on the exchange. The tokens opened at $1 and traded up to $1.50 by July.
Zhao’s Offer for a Stake in FTX
Just before the listing, Zhao showed interest in Bankman-Fried and offered to buy a 20% stake in FTX for $80 million. This offer came as a surprise to Bankman-Fried, who had previously been less interested in Zhao.
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