TLDR
- Changpeng Zhao reveals Sam Bankman-Fried asked for billions in a casual manner before FTX collapsed.
- Zhao explains that Binance’s letter of intent to acquire FTX was a formality with no real commitment.
- Zhao criticizes Alameda CEO Caroline Ellison’s move to set a floor price for FTT, triggering a market collapse.
- Binance faced a $7 billion bank run after the FTX crisis, but was able to reassure users that their funds were safe.
- Within a month, Binance users returned their funds and even deposited more following the panic withdrawal.
Changpeng Zhao, founder of Binance, has shared an astonishing account of his conversation with Sam Bankman-Fried (SBF) before the collapse of FTX. In his memoir Freedom of Money, Zhao recalls that Bankman-Fried casually asked for billions of dollars as if it were a trivial request. The phone call came just before Binance attempted to acquire FTX in November 2022, a deal that ultimately fell apart.
Zhao explained that although he signed a non-binding letter of intent to explore the acquisition, he had no genuine interest in owning FTX. He made it clear that the agreement was a mere formality, with the intention to assess FTX’s financial situation. Zhao was also clear about his lack of interest in helping Bankman-Fried, a stance he reaffirmed in the book.
No Commitment Behind Binance’s Letter of Intent
Changpeng Zhao describes the decision to sign the letter of intent as a procedural step, not a commitment. He writes, “I was explicit that we were not making any commitment. Our team would simply assess the numbers and then decide.” Despite this, he acknowledged that Binance could have stepped in to protect FTX users and the broader crypto industry from further turmoil.
Zhao revealed that Bankman-Fried’s request for a “couple of billion dollars” came without urgency, like “asking for a bologna sandwich.” This casual tone only heightened Zhao’s skepticism. The deal never progressed, and Binance walked away from acquiring FTX by November 9, 2022, after realizing the full extent of FTX’s financial issues.
FTX Collapse and Alameda’s Fatal Mistake
The collapse of FTX accelerated after Caroline Ellison, CEO of Alameda Research, tried to buy Binance’s FTT token holdings. She offered to purchase the tokens at $22 each in a bid to stabilize the market. However, Zhao points out that this attempt to create a floor price was a critical error. By revealing the price point, Ellison inadvertently triggered a wave of short-selling.
This led to a rapid decline in FTT’s price, which plummeted from $22 to just $5 within 72 hours. Zhao noted that within that short span, $6 billion exited FTX. Binance was left holding a depreciating asset, which had once been worth $580 million at its peak. Zhao acknowledged the company’s previous losses, including the $1.6 billion wiped out during the LUNA collapse.
In the aftermath of the FTX collapse, Binance faced its own financial challenges. On December 14, 2022, the exchange experienced a bank run with $7 billion withdrawn in a single day. However, Zhao remained unfazed, stating that he was not worried. He reassured that all user funds were safe, and the company had sufficient reserves to cover the withdrawals.
Zhao’s confidence proved well-founded, as users returned their funds within a month and even deposited more. Despite the initial panic, Binance was able to weather the storm, maintaining its position as one of the largest crypto exchanges.
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