Binance pulls out of FTX bailout deal

Binance, the world’s largest cryptocurrency exchange, revealed yesterday via Twitter that it will not make good on its conditional intent to bail out Bahamian-headquartered cryptocurrency exchange FTX, owned by Sam Bankman-Fried, who has reportedly filed for bankruptcy according to many sources.

Several news sites reported that the US Securities and Exchange Commission is now looking into the inner workings of FTX, after it was announced on Tuesday that Bankman-Fried called Binance owner Changpeng Zhao, also known as CZ, for a bailout after there was a run on FTX’s token FTT that left FTX in a liquidity crisis.

When asked about the developing situation, FTX’s Vice President of Communications and Corporate Social Responsibility Valdez Russell told this paper yesterday that the company is currently focused on the well-being of its employees and investors.

“At FTX we are focused on the task at hand to protect our customers and do what is right for our employees and investors,” said Russell.

“We recognize the enormity of this task and the impact that it will have locally yet still, we resolve to do what is right for our community.”

Calls to Attorney General Ryan Pinder and Executive Director of the Securities Commission of The Bahamas (SCB) Christina Rolle on the developing situation with FTX were not answered up to press time yesterday.

Acting Prime Minister Chester Cooper told this paper yesterday that he has been briefed on the FTX situation, but could not say much on the matter.

“I have been briefed on the matter by the attorney general,” said Cooper.

“This is a matter for the regulators and there are international implications. We have a well-established regulatory regime, with a top-notch reputation in international financial services.

“I am constrained from commenting further, but I am confident that the matter is in the sights of the relevant regulators.”

In April, Prime Minister Philip Brave Davis officially opened the offices of FTX, explaining in his address during a ribbon-cutting ceremony that it is his hope that the domiciling of FTX in The Bahamas will be a catalyst for more fintech firms to open offices.

Davis said during his remarks that “companies like FTX want to be in a well-regulated, stable environment like ours where continued growth and expansion are supported”.

Bankman-Fried has said his company chose The Bahamas from a laundry list of countries because of its digital assets legislation, known as the Digital Assets and Registered Exchanges (DARE) Act.

During the groundbreaking for FTX’s $60 million headquarters, Bankman-Fried said FTX searched the globe with a fine-tooth comb to find a well-regulated jurisdiction to set up shop.

“We sort of went country by country and crossed off the ones that required a license but could not grant one,” said Bankman-Fried.

“We weren’t sure where we’d end up… we sort of got word that one of them (countries) actually had already passed a cryptocurrency regulation regime, one of the only jurisdictions in the world to do so, and the few emissaries we had sent out to check it out had a really, really good experience. That was The Bahamas.

“Halfway through the process of trying to figure out where we would be, The Bahamas sort of jumped all the way to the front.”

Bankman-Fried said the work that had been done by the SCB and the government went a long way in helping FTX make the decision to move its company to this country.

FTX also held one of the world’s largest cryptocurrency and blockchain conferences called Crypto Bahamas at Baha Mar this year in partnership with thought leadership group SALT.

Baha Mar recently hailed FTX as being good for the country and good for Baha Mar.

The future of Crypto Bahamas, which brought speakers like former British Prime Minister Tony Blair and former US President Bill Clinton, now hangs in the balance. 

Crypto Bahamas 2023 has already been announced and organizers planned to fill Baha Mar to capacity with attendees. 

There is still no understanding of what FTX’s possible collapse could mean for all of the commitments and investments the company and its team have made in The Bahamas, including a multimillion-dollar investment in a headquarters in western New Providence.

There is also speculation that there could be widespread damage to this country’s reputation, after FTX became the golden child for digital assets regulations in The Bahamas and the great hope for a big future in the digital assets industry in this country.

Bankman-Fried shared these comments online on Tuesday: “Things have come full circle, and FTX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX. 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. A huge thank you to CZ Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.”

As of last evening, news wire agency Reuters reported that Bankman-Fried told investors the company needs $8 billion to cover the shortfall caused by the number of withdrawal requests the company received in the past few days.