​“The deal did not make sense.” Binance CEO explains the reluctance to bail out FTX

What’s new? The head of cryptocurrency exchange Binance, Changpeng Zhao, speaking at the Indonesia Fintech Summit, said that the deal to acquire FTX did not make sense for several reasons. One of them Zhao called the potential problems with US regulators. Earlier, Bloomberg reported that a group of representatives from the Department of Justice, the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC) were investigating FTX, but SEC chair Gary Gensler did not confirm this information.

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What other reasons did Zhao voice? The head of Binance pointed to an overlap in the user demographics of both platforms. “We cover all the regions they cover, and they have much less users than us,” he explained. On the technology side of things, Zhao said that Binance has “a superior product.” He also highlighted FTX’s significant balance sheet shortfall. A Bloomberg source reported that it was as high as $8 billion. The exchange’s CEO Sam Bankman-Fried noted it needs at least $4 billion to remain solvent.

Binance backed out of the FTX takeover deal following due diligence of its documents, less than a day after the agreement was made. The company noted that FTX’s position left no possibility of helping its customers by providing liquidity. Later, when news emerged that FTX might have embezzled user funds and US regulators began to investigate the exchange, the Binance team realized that it “can’t touch that anymore,” Zhao added.

Another statement from the head of Binance focused on the actions of regulators. In his view, they tend to focus on monitoring compliance with know your customer and anti-money laundering (KYC/AML) regulations, but it is also important to check the exchanges’ operations and their proof-of-reserves.

On November 10, Binance reported that the value of digital assets in its reserves exceeded $69,39 billion. Zhao added that only the top coins are included in the publication so far, but they also cover 80 to 90% of user funds. The company will provide a more detailed report after the audit. Earlier, in connection with the collapse of FTX Zhao appealed to the leadership of other trading platforms to publish data about their balances to increase transparency and confidence in the industry.