The news came as FTX faced an apparent liquidity crunch following the collapse of its native token.
FTX CEO Sam Bankman-Fried initially approached Seychelles-based crypto company OKX a day before it announced its new agreement with Binance. According to an OKX spokesperson, SBF discussed with OKX on Monday about a deal before the news of Binance acquiring FTX came to the limelight.
FTX Met with OKX before Announcing Binance’s Takeover
SBF announced its new relationship with Binance, noting that the company has signed a non-binding agreement to acquire FTX. The news came as FTX faced an apparent liquidity crunch following the collapse of its native token, FTT. The OKX representative revealed that the company turned down the deal when approached by the FTX CEO. Basically, OKX was concerned about the consolidation of exchanges, saying it would be a step backward for the industry. At the time of the discussion between FTX and OKX, SBF did not specify the worth of the transaction.
A senior executive at OKX confirmed that the FTX head requested between a $2 billion and $4 billion cash injection from OKX. The director of financial markets at OKX, Lennix Lai, said the appeal showed that FTX was faced with urgency and the cash would have helped it survive the liquidity crisis. Lai talked more about the discussion with Bankman-Fried on the 8th of November:
“Sam said he was talking with a few other potential investors, so he needed an urgent decision from us.”
It appears that Binance is one of the “other potential investors.” Before the FTX boss unveiled Binance as the company taking over the exchange, the businessman was under pressure. Changpeng Zhao tweeted on Sunday that his company would be liquidating its FTT holdings as a result of unspecified “recent revelations.”
The spokesperson added that OKX management persuaded the FTX head to “work things out with CZ.” According to the leadership, CZ agreeing not to sell Binance FTT possessions benefits the Seychelles-based company. The executives are worried about Zhao “making a monopolistic sale.”
Meanwhile, the CEO of Binance mentioned that the company can still withdraw from the agreement with FTX at will. He also said that FTT would be “highly volatile” in the next few days. The token, which started dropping amid news that FTX had halted withdrawals, began to rebound following news that Binance was taking over. The crypto grew as much as 25%, up from a low of about $14. Before both companies ramped up the agreement, both CEOs said their teams would conduct due diligence. FTX CEO wrote:
“Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. – we apologize for that.”
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