Key Takeaways
- Binance founder CZ discloses how Sam Bankman-Fried requested billions with remarkable nonchalance prior to FTX’s downfall.
- The Binance chief clarifies that signing a letter of intent for FTX acquisition was purely procedural without genuine commitment.
- CZ points to Caroline Ellison’s strategic error of establishing a $22 floor price for FTT, which accelerated market panic.
- Despite experiencing a massive $7 billion withdrawal in one day after FTX’s collapse, Binance maintained financial stability.
- User confidence in Binance was restored within weeks, with customers not only returning funds but increasing deposits.
In a remarkable disclosure from his recently published memoir Freedom of Money, Binance’s founder Changpeng Zhao has unveiled the extraordinary details of his interactions with Sam Bankman-Fried during the final days before FTX’s spectacular implosion. According to Zhao, the disgraced exchange founder approached him for billions of dollars with a demeanor suggesting he was requesting something utterly mundane. This pivotal conversation occurred in November 2022, during the period when Binance briefly considered rescuing FTX through acquisition—a transaction that never materialized.
According to Zhao’s account, while he did execute a non-binding letter of intent to investigate the potential acquisition, his true interest in taking ownership of FTX was virtually nonexistent. The Binance executive emphasized that the document served primarily as a mechanism to gain insight into FTX’s actual financial condition. Zhao left no ambiguity regarding his reluctance to provide assistance to Bankman-Fried, a position he firmly maintains throughout his written account.
The Letter of Intent Was Merely Procedural
In his memoir, Changpeng Zhao characterizes the letter of intent as nothing more than a formality rather than any binding obligation. He explicitly states, “I was explicit that we were not making any commitment. Our team would simply assess the numbers and then decide.” Nevertheless, he conceded that Binance possessed the capability to intervene and potentially shield FTX customers and the cryptocurrency ecosystem from additional damage.
Zhao disclosed that when Bankman-Fried requested “a couple of billion dollars,” he did so with the same casual attitude one might employ when “asking for a bologna sandwich.” This remarkably relaxed approach to securing massive funding only deepened Zhao’s doubts about the situation. The proposed acquisition quickly disintegrated, with Binance officially abandoning the FTX deal by November 9, 2022, once the exchange’s dire financial circumstances became apparent.
Caroline Ellison’s Miscalculation Accelerated the Crisis
The unraveling of FTX gained momentum when Caroline Ellison, who led Alameda Research, attempted to acquire Binance’s FTT token position. She proposed purchasing the tokens at $22 per unit in an effort to prevent further market deterioration. According to Zhao’s analysis, this strategy of establishing a price floor proved disastrous. By publicly disclosing this specific price level, Ellison unintentionally invited aggressive short-selling activity.
The consequences were devastating: FTT’s value crashed from $22 to merely $5 in just 72 hours. Zhao documented that during this brief timeframe, approximately $6 billion fled from FTX. Binance found itself holding a rapidly depreciating asset that had previously reached a valuation of $580 million. Zhao also referenced earlier financial setbacks, including the $1.6 billion loss sustained during the LUNA ecosystem collapse.
Following FTX’s collapse, Binance confronted its own moment of crisis. On December 14, 2022, the platform experienced an intense bank run with $7 billion in withdrawals occurring within 24 hours. Despite the severity of the situation, Zhao maintained his composure, expressing complete confidence in the platform’s stability. He publicly assured customers that all deposits remained secure and that Binance possessed adequate reserves to process every withdrawal request.
Zhao’s assurances ultimately proved accurate. Within 30 days, customers had returned their withdrawn funds and actually increased their total deposits beyond pre-panic levels. Despite the temporary crisis, Binance successfully navigated the turbulent period and preserved its standing as a dominant force in the cryptocurrency exchange industry.
