Sam Bankman-Fried Reveals Intention to Sell FTX to Binance During Testimony
During his testimony in court, Sam Bankman-Fried disclosed that he had planned to sell FTX, the now-bankrupt cryptocurrency exchange, to Binance when it was still in its early stages. Bankman-Fried and co-founder Gary Wang were working together in 2019 to establish FTX in Hong Kong with a focus on margin trading and providing customers with the ability to make large bets.
Bankman-Fried believed that there was a gap in the market for an exchange specializing in margin trading, which is why he anticipated that Binance would be interested in acquiring FTX. However, Binance ultimately backed out of the potential acquisition due to issues beyond their control or ability to assist.
Despite initial challenges in attracting customers, FTX gained traction through word-of-mouth and generated significant revenue. Bankman-Fried mentioned that FTX earned $20 million in revenue in 2019 and reached $3 million per day by 2021. The risk engine of FTX, which took a comprehensive approach to assessing customer accounts and managing liquidations, was one of its key selling points.
Binance’s Role and FTT Token
Binance played a crucial role as an early investor in FTX, providing $80 million worth of its BNB token as seed money. However, Binance did not acquire FTX but instead utilized an internal team to develop its own platform. Bankman-Fried highlighted that BNB served as inspiration for FTX’s failed exchange token (FTT).
FTX filed for bankruptcy after a sharp decline in FTT value triggered a wave of withdrawals. The exchange was unable to meet the mass exodus demand due to insufficient reserves of customer assets. Bankman-Fried’s company later bought out Binance’s stake in FTX using a combination of FTT and other assets worth $2.1 billion.
FTX implemented an initiative to reduce the supply of FTT tokens by purchasing them weekly and burning them, similar to a public company buying back its shares. Bankman-Fried stated that the goal was to reward account holders and share the exchange’s success through FTT benefits.
Hot Take: Missed Opportunity or Blessing in Disguise?
The revelation of Sam Bankman-Fried’s intention to sell FTX to Binance raises questions about what could have been if the acquisition had materialized. While Binance showed initial interest, they ultimately decided not to proceed with the purchase. This decision may have spared them from being entangled in the downfall of FTX, which faced bankruptcy due to liquidity issues and inadequate reserves.
Bankman-Fried’s testimony sheds light on the early days of FTX, its revenue growth, and the unique features that set it apart from other exchanges. Despite the missed opportunity with Binance, FTX has made significant strides in the crypto industry and continues to evolve under Bankman-Fried’s leadership.
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