Changpeng Zhao, the founder of Binance, shared revealing details about the collapse of FTX in his recently published memoir, Freedom of Money. In the book, Zhao recounts a pivotal phone call with Sam Bankman-Fried, during which Bankman-Fried casually requested billions of dollars, likening it to asking for a simple bologna sandwich.
Zhao emphasizes that his involvement in signing the non-binding Letter of Intent for the acquisition of FTX was merely procedural. He stated, “I didn’t have any interest in owning FTX. I also wasn’t that interested in helping SBF,” but felt a responsibility to protect users and the broader cryptocurrency industry.
The memoir sheds light on the critical moments leading to FTX’s downfall. Zhao points to a significant misstep by Caroline Ellison, the CEO of Alameda Research, who publicly offered to purchase Binance’s FTT holdings at $22 each. This announcement, according to Zhao, was a serious error that revealed a floor price, prompting professional traders to short the token. The price plummeted from $22 to $5 within days, resulting in a staggering $6 billion exit from FTX.
Additionally, Zhao discusses a group called “Exchange Collaboration,” created by FTX’s Zane Tackett during the earlier Terra/LUNA crisis. This group included prominent figures from various exchanges, including Zhao himself, Bankman-Fried, and others. The group later attracted scrutiny from the Department of Justice and the Securities and Exchange Commission, which investigated potential collusion or market manipulation. Zhao asserts that there was no wrongdoing among the exchanges involved.
By November 9, Binance had withdrawn from the acquisition deal, as its FTT holdings, which had peaked at $580 million, became nearly worthless. The fallout from FTX’s collapse led to a significant bank run on Binance, with $7 billion withdrawn in a single day on December 14. Despite this, Zhao remained untroubled, stating, “I was not worried. All user funds were in our reserves.” He noted that, within a month, users had returned their funds and even deposited more.
Changpeng Zhao's memoir reveals critical insights into the events leading to FTX's collapse, including a casual request for billions from Sam Bankman-Fried and significant missteps by Alameda's CEO. Zhao's reflections provide a detailed account of the cryptocurrency industry's challenges during this tumultuous period.