Binance was in talks to acquire FTX for less than a single day. It turns out it only took the Binance team two hours to back out of the deal.
What To Know: Binance is the largest cryptocurrency exchange in the world and one of the few big players left standing following the collapse of FTX. The crypto exchange considered a takeover of FTX following its downfall, but a quick look at the company's books steered the team away from the deal.
"In the end we knew after about two hours that the deal probably wasn't going to be able to be feasible anymore and we spent the next eight hours on how we could communicate that and move out of that position," Binance Chief Strategy Officer Patrick Hillmann said Thursday on Benzinga's "Stock Market Movers."
Hillmann noted that he wasn't able to talk about what he specifically saw in FTX's books, but Binance CEO Changpeng "CZ" Zhao told CNBC in mid-November that it was pretty clear the user funds were gone.
Hillman instead highlighted recent comments from new FTX CEO John Ray III.
"We saw John Ray's statements he's made to the courts and I think we found that refreshing and probably highly likely to be accurate," Hillman said.
Why It Matters: Ray submitted an initial statement with the U.S. Bankruptcy Court on Nov. 17.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray said in the filing.
"From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented."
When Binance went to review FTX's books, the firm had expectations for what it might see, but "it turned out to be quite a bit bigger than we realized," Hillmann told Benzinga on Thursday.
At that point, Binance knew it could either sit on the review so it looked like it spent more time in the process or the firm could pull out immediately and risk accusations about the company's real intentions.
"If we had sat on it for longer ... then we could be accused of waiting while they could have been out there looking for other investors to come in to save those funds, so we were between a rock and a hard place," Hillmann said.
FTX founder and former CEO Sam Bankman-Fried is under investigation. During an interview at the New York Times DealBook Summit on Wednesday, Bankman-Fried said, "I unknowingly comingled [customer] funds, and [Alameda Research] funds."
See the full interview with Hillmann here:
Crypto Price Action: Binance's native token BNB/USD was down 2.54% over a 24-hour period at $292.01 at time of publication.
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