FTX co-founder Sam Bankman-Fried testified that FTX considered selling to Binance but the deal didn’t materialize, leading FTX to develop independently.
Key Takeaways
- Sam Bankman-Fried reveals FTX’s early plan to specialize in crypto margin trading.
- FTX believed Binance would be interested in acquiring the exchange.
- Binance initially showed interest but eventually backed out of the deal.
- Binance’s BNB token served as an inspiration for FTX’s FTT token.
On Friday, October 27, Sam Bankman-Fried, the founder of FTX, testified before the US court, acknowledging his mistakes while denying defrauding US customers. However, what caught everyone’s attention was his revelation about FTX’s early plan to sell itself to crypto giant Binance.
The FTX and Binance Saga
When Bankman-Fried and co-founder Gary Wang established FTX in 2019 in Hong Kong, their vision was clear. They aimed to create a platform specializing in margin trading, allowing customers to place significant bets.
During his court testimony, Bankman-Fried disclosed that FTX believed it should position itself as a specialized venue for margin trading – a niche that few other exchanges were addressing at the time. This led to the belief that a major player like Binance might be interested in acquiring FTX.
SBF Testifies How FTX’s Plan to Sell the Exchange to Binance Failedhttps://t.co/qgTEyPhJUL pic.twitter.com/IgX6CghKxS
— John Morgan (@johnmorganFL) October 28, 2023
One of FTX’s initial distinguishing features was its advanced risk engine. Unlike other exchanges, FTX’s risk engine took a holistic view of customers’ accounts, determining when traders’ positions would face liquidation more effectively.
Additionally, cross-margin trading played a significant role in FTX’s early success. This feature allowed traders to utilize surplus margin from one trade to fulfill margin requirements for other trades.
Binance Backed Out of FTX Deal
While Binance did express interest in acquiring FTX when the exchange faced difficulties in November of the previous year, the deal eventually fell through. Binance CEO Changpeng Zhao cited issues beyond their control as the reason for withdrawal, stating, “The issues [with FTX] are beyond our control or ability to help.”
Surprisingly, instead of pursuing an acquisition, Binance used an internal team to enhance its own platform.
To Conclude
The revelation of FTX’s initial plan to sell itself to Binance sheds light on the competitive landscape within the crypto industry. While the deal didn’t materialize, it highlights how ambitious and forward-thinking FTX’s founders were in positioning their exchange as a specialized player in margin trading. Binance’s interest in FTX also underscores the attractiveness of such ventures in the ever-evolving world of cryptocurrencies.
