Binance CEO Changpeng ‘CZ’ Zhao knew Sam Bankman-Fried was in a desperate situation when the former CEO of the now-bankrupt FTX exchange called him for a bailout.
CZ opened up on the events that nearly saw Binance come to the rescue of its ailing industry competitor as a credit crunch sent FTX into an inescapable spiral. Speaking at the Milken Institute’s fourth annual Middle East and Africa summit, CZ reflected on the fateful call with SBF as the latter looked to save his struggling exchange:
“When he came to me, I knew he was desperate. If we can’t help him, there’s probably nobody else that would. Probably a bunch of people passed on the deal before us.”
CZ admitted that he had intended to explore a lifeline for FTX in the interest of affected users, but due diligence carried out after signing a letter of intent quickly highlighted bigger problems than Binance had imagined. The deal was subsequently scrapped.
A couple of days later, FTX filed for Chapter 11 bankruptcy, sending shockwaves through the cryptocurrency and wider financial ecosystem.
A lot has been made of Zhao’s relationship with Bankman-Fried in the industry, with rumblings of a nemesis-type relationship building in recent months. Allegations of SBF lobbying against CZ and his exchange with influential figures in Washington DC were all touched on in the wide ranging conversation in Abu Dhabi on Nov. 16.
According to the Binance CEO, SBF had initially been a client of Binance through Alameda Research and had looked to partner with CZ’s company to start a cryptocurrency exchange of his own.
CZ described SBF as a ‘young, technically capable kind of person’ with a ‘decent team’ which led Binance to invest in the fledgling FTX exchange which was founded in May 2019. The investment proved fruitful up until a certain point:
“Their user numbers grew but then once they’d grown to a certain size, I just heard all kinds of rumors, all kinds of people telling me this guy is lobbying behind you in DC, this guy is saying bad things behind you and we were like this is not so good.”
Binance exited its FTX investment a year and a half ago, which proved to be a fateful incident. According to CZ, part of the exit saw Binance acquire FTX Tokens (FTT), the same tokens that the exchange had announced it would begin to sell in the open market after rumblings of troubles with FTX and Alameda’s financials.