Changpeng Rejects FTX’s Proposal for Innovative Futures Exchange, Creating Tension Amidst Crypto Market Volatility.
In March 2019, Binance CEO Changpeng Zhao (CZ) purportedly declined a $40 million proposition from former FTX CEO Sam Bankman-Fried (SBF), which centered on the creation of a cryptocurrency futures exchange.
SBF’s vision was straightforward: to establish a futures exchange that mitigated risk within the inherently volatile realm of cryptocurrency trading. Conventional futures exchanges typically enable traders to employ leverage with minimal collateral. However, the crypto market is known for its extreme price fluctuations, adding to its inherent volatility.
The inherent volatility of the crypto market can lead to exchanges facing the risk of bad debts arising from inadequate collateral. In response to this challenge, FTX’s proposed model aimed to implement active monitoring of trader activities. Additionally, when a trade surpassed the collateral, the system would automatically liquidate the trader’s positions, effectively limiting potential losses for the exchange.
FTX Introduces Futures Offerings Despite Binance’s Rejection
However, during that period, Binance and FTX had divergent objectives. FTX aimed to cater to institutional investors, while Binance primarily focused on retail customers. After careful consideration of SBF’s proposal, CZ opted not to provide funding for it. Instead, Binance opted to develop its own in-house futures platform. This decision did not sit well with SBF, leading him to publicly criticize CZ as a “douche” for his choice.
Despite this setback, FTX proceeded to launch its own futures exchange in 2019. Reflecting on this venture, SBF remarked, “If it works, it is worth billions of dollars, but I thought there was a better than 50% chance it wouldn’t work. I’d never done marketing. I’d never talked to the media. I’d never had customers. It was just different from anything that I’d ever done.”
CZ Declines FTX’s Acquisition Offer in 2022
Furthermore, in 2022, there was another notable interaction between the two CEOs. During the FTX liquidity crisis, the platform approached Binance with an offer for a possible acquisition. However, CZ rejected the proposal, stating that the platform was beyond rescue. These recent disclosures have garnered attention, coinciding with the commencement of SBF’s trial in New York, where he faces significant allegations of fraud and money laundering linked to the downfall of FTX.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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