[Feature] The War Between Binance and FTX

Binance exited from FTX equity last year, receiving $2.1 billion USD equivalent in BUSD and FTT. This led to some analysts predicting that Binance will sell their FTT tokens and start a blockchain war with FTX.

Now that Binance has decided to liquidate their remaining FTT in their books and started the battle, Coinlive will take you through the reasons and current situation of the war.

1.Possible reason for Binance’s liquidation: Alameda is rumoured to be “insolvent”

On November 4, Coindesk, a well-known American media, obtained a private document revealing the balance sheet of Alameda, a subsidiary of SBF (Sam Bankman-Fried).In there, Alameda had an alarming number of related transactions with FTX, an exchange controlled by SBF. Alameda had $14.6 billion in assets as of June 30, with its largest single asset, unlocked FTT (the token of FTX) worth about $3.66 billion. The third-largest holding on the balance sheet is $2.16 billion of “FTT collateral.” Among its $8 billion in liabilities is $7.4 billion in loans.

Alameda CEO Caroline Ellison declined to comment on Coindesk‘s investigation. FTX also did not respond to a request for comment. Market rumours suggest that Alameda’s $8 billion loan is likely to come from FTX or SBF itself, and if the market falls, Alameda will face insolvency.

2.Alameda’s response: The circulating balance sheet has more than $10 billion assets not reflected

Alameda CEO Caroline Ellison clarified some details on the balance sheet in response to Coindesk’s findings. The specific balance sheet is for a subset of their corporate entities, and they have over $10 billion in assets not reflected there.

The balance sheet lists a few of their largest long positions; they have hedges that are not listed – they have now paid off most of their loans given the tightening of the crypto credit space this year.

3. CZ: All remaining FTT will be liquidated in the next few months

Binance founder CZ (Changpeng Zhao) tweeted on November 6 that Binance received about $2.1 billion in cash (BUSD and FTT) as part of its exit from FTX last year. Due to the recent balance sheet revelations of Alameda, Binance decided to liquidate any remaining FTT on their books.

CZ also said Binance will do so in a way that minimises market impact. This is expected to take several months to complete due to market conditions and limited liquidity.

Lastly, he emphasised that this is not a move against a competitor, in his words: “Our industry is in its nascency and every time a project publicly fails it hurts every user and every platform. We typically hold tokens for the long term. And we have held on to this token for this long. We stay transparent with our actions.”

4.Alameda: Willing to purchase all FTT held by Binance for $22

Alameda CEO Caroline Ellison responds to CZ: If you want to minimise the impact of the market on your FTT sales, Alameda is happy to buy from Binance today for $22.

5.Binance started selling FTT as early as November 5

On November 52022, CZ inexplicably tweeted that cryptocurrencies are very risky.

In less than 2 hours, Whale Alert detected that 23 million FTT (worth $584 million) were transferred from unknown wallet addresses to Binance Exchange.

On November 7, CZ responded that the FTT monitored by Whale Alert was part of the FTT that Binance was required to clear.

There is a high probability that after viewing the balance sheet, regardless of whether CZ was cautious of the numbers or that he took the opportunity to suppress his competitor, FTX, that the truth, backed by on-chain data, was that he began to sell FTT.

6.CZ: The liquidation of FTT is to mitigate risk, and a lesson from Luna’s collapse

On November 7, CZ continued to say that the liquidation of FTT is for risk management and lessons learnt from the failure of LUNA.

Binance is not against anyone but will not support those who are lobbying against other industry players behind their backs. CZ also added that this was not a war or a battle, Binance just did some “housecleaning” and then moved on.

7.SBF joins the fray: Rumours are baseless and FTX is highly regulated

SBF officially joins the fray: A bunch of unfounded rumours have been circulating (in reference to Alameda’s balance sheet amongst others).

SBF reiterated that FTX keeps audited financials, and while it sometimes slows things down on products, it leaves FTX highly regulated. FTX has processed billions of dollars in deposits/withdrawals today, and there is a lot of USD <> stablecoin exchange going on.

8.Alameda: Emergency mobilisation of $560 million from Circle to FTX

After the Coindesk investigation emerged, there was a surge of withdrawals for ETH and their stablecoin reserve reached an all year low.

Alameda began to mobilise USDC from Circle to recharge FTX. Etherscan data shows that in the past three days, the Alameda address (0x83a127952d266a6ea306c40ac62a4a70668fe3bd) deposited about $560 million USDC into FTX, mainly from Circle.

With Binance and FTX in a huge battle and lots of negative sentiments created towards FTX, FTT prices fluctuated wildly as a result, especially in the past 24 hours during CZ’s tweet that their FTT will be liquidated and Alameda CEO Caroline Ellison’s tweet that Alameda wants to buy over all Binance FTT.

As the two biggest giant crypto exchanges, the war between Binance and FTX will continue; Coinlive will update this article regularly with on-demand news regarding this.