Binance CEO Changpeng “CZ” Zhao knew Sam Bankman-Fried was in a desperate spot when the former CEO of the now-bankrupt exchange FTX called him to the bailout.
CZ opened up about the events that almost saw Binance rescue its struggling competitor in the industry as the credit crunch sent FTX into an inevitable downward spiral. Speaking at the Milken Institute’s fourth annual Middle East and Africa Summit, CZ reflected on the fateful call to the SBF as the latter looked to rescue the struggling exchange:
“When he came to me, I knew he was desperate. If we couldn’t help him, there probably isn’t another person who would. A group of people might have gone through the deal before us.”
CZ admitted that it intended to explore a lifeline for FTX in the interest of affected users, but the due diligence was carried out after signing a letter of intent that quickly highlighted bigger problems than Binance had imagined. The deal was later cancelled.
Two days later, FTX filed for Chapter 11 bankruptcy, sending shock waves through the cryptocurrency and broader financial ecosystem.
Related: Sam Bankman-Fried says he regrets filing for bankruptcy: Report
Much has been said about Zhao’s relationship with Bankman-Fried in the industry, with the hustle and bustle of building an enemy-type relationship in recent months. Allegations of SBF lobbying against CZ and his exchanges with influential figures in Washington, D.C., were addressed in a wide-ranging conversation in Abu Dhabi on November 16.
According to the Binance CEO, SBF was initially a client of Binance through Alameda Research and was looking to partner with CZ to start its own cryptocurrency exchange.
Describing SBF as “the type of person with technical and technical ability” with a “decent team,” CZ led Binance to invest in the fledgling FTX exchange, which was founded in May 2019. The investment proved fruitful up to a point:
“Their user numbers grew, but then, once they grew to a certain size, I just heard all kinds of rumors, all kinds of people telling me this guy is lobbying behind you in DC, this guy is saying nasty things behind you, and we were, like, ‘This isn’t well.”
Binance exited its investment in FTX a year and a half ago, which proved to be a fateful accident. According to CZ, part of the exit saw the acquisition of FTX token by Binance
, which are the same tokens that the exchange announced it would start selling on the open market after consecutive turmoil with the financials of FTX and Alameda.
“When he reached out to me, I thought he was going to ask for an OTC [over-the-counter] deal to buy FTT tokens, and that way, we were going to silence the noise in the market. But when he contacted me, he quickly hinted that they were in big trouble, and they were looking for a buy deal.”
CZ also addressed a tweet from the former CEO of FTX that he believes is targeting the founder of Binance. Describing CZ as a “sparring partner,” the SBF appeared to congratulate the Binance CEO for outmaneuvering him during the events that transpired:
CZ responded by saying that “only a psychopath could write that tweet” and that it did not view other exchanges as direct competitors due to the nascent stage of the cryptocurrency market and its minuscule share of the overall financial markets:
“Number one, he never told me I was his sparring partner. I’m not actually sure if this tweet is aimed at me or at us (Binance). We don’t view other exchanges as partners or competition — it’s not a boxing match.”
As more revelations continue to emerge about the massive FTX crash, misappropriation of user funds and fraudulent transactions, CZ alleged that Bankman-Fried continued to look for ways to withdraw funds through various blockchain methods.
That day, when he tweeted that, he should have been working on other things. He shouldn’t be writing tweets. In one of the letters I sent him at an industry group, I said, “Honest advice, Sam, stop doing what you’re doing, don’t do anything else, put on a suit and go back to D.C. and start answering questions.”
The Binance founder also addressed questions about his influential tweet, mentioning Binance’s intention to sell its FTT tokens, which coincided with an insurmountable number of withdrawal requests on the FTX platform.
A number of blockchain analysis firms and individuals in the industry have publicized the move, sparking controversy across the cryptocurrency ecosystem. CZ confirmed that Binance was transparent in its procedures and did not manipulate the markets:
“And then our team asked me, should we say, ‘Look, this is our transaction,’ and I said, ‘Yes, why not,’ we want to be transparent. How can you manipulate the market if you are transparent about your actions? We didn’t lie, we didn’t cheat.”
With FTX entering bankruptcy proceedings, its new CEO and Director of Restructuring, John Ray III, moved to distance the company from Bankman-Fried. This comes after the former CEO continued to make public comments on Tw