Sam Bankman-Fried’s (SBF) crypto empire was rattled yesterday when Binance began selling off its 23 million FTT tokens, worth more than $500 million.
In a statement made shortly after the transaction, Binance chief Changpeng Zhao (CZ) said that the exchange intends to sell all of its FTT tokens in the coming months. This is in response to revelations of the illiquid status of the token, which incidentally also makes up as much as half of the assets held by Alameda Research.
Alameda Research CEO Caroline Ellis denied the claims of illiquidity and said it would be willing to buy up Binance’s tokens. SBF replied with a tweet saying he respects anyone who contributed to building the cryptocurrency industry, including CZ.
The price of FTT dropped 10% as Binance initiated its transactions while the price of Solana dipped even further. The news was followed by a record volume of withdrawals from FTX which, due to it being low on USDC liquidity, increased its withdrawal fee to $100. This fee varies depending on how much you want to withdraw.
CZ’s mega-dump carried with it a strong political overtone and in a second statement he accused SBF of trying to impose laws on the industry without the blessing of other players.
SBF has been a top crypto-lobbyist in the US and has sponsored his own draft crypto-legislation that has been presented by US senators Debbie Stabenow and John Boozman.
The bill caused some controversy with its definition of ‘digital commodity’ and its proposed regulation of DeFi.
The rivalry between CZ and SBF is, at its heart, the story of a bromance gone sour. The two and their respective companies are natural competitors that had until now been brought together in a strategic partnership. Let’s take a look at some of the key ups and downs in one of crypto’s most high-profile relationships.
The acrimonious break-up all started with a $150 million lawsuit filed by a Pavel I. Pogodin that claimed that FTX tried to manipulate the price of Bitcoin futures on the Binance exchange.
The lawsuit was originally flagged on Twitter by podcaster Samuel McCulloch who tweeted, “the complaint alleges that @FTX_Official ran an unlicensed money transmitting business with its OTC desk.”
He further explained, “the crux of the plaintiff’s argument is that FTX used its position to manipulate BTC prices using momentum ignition algos, with the goal of creating liquidation cascades. After rapidly moving prices, Defendants used multiple loser accounts to benefit a winner account.”
However, CZ quickly came out against the lawsuit, claiming that Binance had been attacked by a smaller exchange, rumored to be FTX. He later clarified that the ‘attack’ had in fact been an accident, but Alameda still saw fit to publicly brand the allegations as “baseless” and “bullshit.”
Despite the previous clash, Binance announced a strategic partnership with FTX that was intended to “further develop the cryptocurrency ecosystem.” As part of the partnership, Binance bought an undisclosed equity stake in FTX and took a long-term position in FTT.
For its part, FTX was supposed to “help build out the liquidity and institutional product offerings across the Binance ecosystem, including its exchange (Binance.com) and over-the-counter (OTC) trading desk.”
FTX also pledged to work with Binance on developing products designed to give users access to a tokenized ecosystem.
FTX ended the investment partnership between itself and Binance by buying back Binance’s stake. According to CZ, it paid up to $2.1 billion in tokens distributed between BUSD and FTT. When explaining the divorce, SBF cited differences in how the two businesses were run, specifically taking a shot at Binance’s well-documented regulatory issues.
“I’m not involved in the conversations between them and regulators, and so all I can do is speculate, but something I’ll say is that we try really hard to be as cooperative as we can with regulators.
“I think that when you don’t do that, and when you sort of appear less flexible or responsive, I think that’s more likely to lead to cases where regulators might feel like they have no choice but to start bringing the hammer,” Bankman-Fried said.
This is where things start to get a little more personal, with SBF taking to Twitter to mock his one-time buddy’s problems with attending Senate hearings regarding crypto regulation.
There are rumors that CZ risks being arrested if he visits the US due to ongoing money-laundering investigations with regard to activities in Binance.
CZ starts to dump his tokens and at the same time, Binance is forced to respond to a Reuters article claiming that the company was targeting other platforms. The firm says the allegations are the result of a “competitor spreading misinformation to the media.”
So where do Binance and FTX go from here? Only time will tell but things look likely to get worse before they get better.