The last 24ish hours have been absolutely insane, to say the least. After crypto seemed to be finding its footing and looking to finally break out and break up rumors emerge about FTX facing insolvency. If you had asked me about this happening a week ago I would have said there was no way that it could occur but everything unraveled on SBF and boy did they fast.
Background
Sam Bankman-Fried considered a wunderkind in the crypto world runs/operates three different companies to keep it simple. He has FTX, the second largest exchange, FTX.US , the U.S. version entity of FTX which had just bought Voyager, and a sister company that only really became known when Three Arrows Capital (3AC) collapsed Alameda Research.
Binance is known as the world's largest crypto exchange and the second largest is FTX. When FTX was getting started its first investor was actually Binance. So when news broke over the weekend Binance CEO CZ announced he would be selling all of Binance's FTX (FTT) tokens due to a significant liquidity crunch at FTX rumors rapidly started to swirl. At the same time, a leaked report stated that Alameda Research used FTT as collateral for most of their positions. This news led to the crash of a ton of different cryptos and projects who had FTX and Alameda as backers.
One of the biggest chains to suffer from this was Solana which has Alameda as a major backer. Since a ton of dApps and blockchain games are/were being built on this chain this naturally just caused a cascading wave of panic. Tuesday morning then FTX actually had to halt withdrawals from its platform due to its Bitcoin balance going negative at one point. The chaos was crazy and widespread without a lot of clarity.
What is Happening Now
Earlier today both CZ and SBF announced that Binance had signed a non-binding letter of intent to buy FTX for an undisclosed sum as well as help cover the liquidity crunch. This purchase will our once Binance has done a deep dive (due diligence) that will be conducted over the coming days. Since it is a non-binding letter of intent Binance does reserve the right to walk away from the deal at any point in time. Also, Binance.US and FTX.US are not affected by this purchase it is just the Binance and FTX exchanges.
Moving Forward/What Lies Ahead
This has caused and will continue to cause a ton of FUD in the industry. For example, even CZ has come out and said that he expects the price of FTT to be extremely volatile in the next few days as the deep dive is done and Binance reviews FTX's documents. For SBF I am not sure if a worse thing could have happened to him. He went on a buying spree, he cast himself as a savior, he was the "crypto guru" but at the end of the day, he fell to the exchange he was hoping to one day challenge for power and relevancy Binance and had to limp back wounded to them.
Since neither of these companies operates in the US I would expect to see regulators across the world launch investigations into FTX and what was going on. Trust in SBF has been shaken to the core and might not able to ever be recovered. Centralized crypto entities once again are showing their dark side with how this transpired.
That is not to say that SBF is alone in possible investigations. There is something to be said that Binance making the comments that they did about removing $2.1 billion from FTX via withdrawal of BUSD and selling FTT manipulated the market in a way to cause FTX to crash. It is a stretch but it is something that people should be aware of as all people see is that Binance is selling all of its FTT and not that they were going to be selling it over the course of several months to minimize market impacts. They helped create fear and cause a bank run that resulted in FTX possibly becoming part of Binance centralizing the centralized exchange space.
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