The chief executive of the world’s largest crypto exchange is revealing why the potential deal with former competitor and bankrupt firm FTX failed to go through.
In an interview at the 2022 Indonesia Fintech Summit, Changpeng Zhao says that rescuing FTX from bankruptcy did not make sense for Binance from both business and legal standpoints.
“From our perspective, the deal did not make sense from a numbers front. From a financial perspective, it’s a big hole. From new users, we have very high overlap. We cover all the regions they cover, and they have much less users than us. From a technology or product perspective, I think we have a superior product. They don’t have anything that we don’t have.
So our original intention was to save the users. But then the news of misappropriating user funds, especially US regulatory agencies investigations, we’re like, ‘Okay, we can’t touch that anymore.’”
The Binance head also says the analogy that crypto is witnessing a 2008-like market meltdown is “probably accurate.”
“I think we’ve just seen another very big player going down. A few months ago, there were LUNA [and] Three Arrows [Capital]. LUNA was big. Three Arrows [Capital] was smaller and then with Celsius [and] Voyager, they were even smaller. But then FTX is big.
With such a big player going down, I think we’re seeing $30 billion to $40 billion that’s in FTX valuation that was before… plus quite a few billion dollars of user funds – that’s gone. With these types of events happening, it’s devastating for the industry. A lot of consumer confidence is shaken. I think basically we’ve been set back a few years.”
In 2008, the world saw one of the worst crises in history as losses from subprime loan investments triggered a severe recession that wiped out over $2 trillion of wealth from the global economy.