The cryptocurrency exchange Binance has pulled out of a deal to save its rival FTX, a blow to investors who had hoped that the agreement would help them retrieve funds after FTX collapsed this week.
Binance said in a statement on Wednesday afternoon that its decision was “a result of corporate due diligence.”
The deal’s collapse could put billions of dollars held in FTX at risk, a startling implosion for a company that just days ago was considered one of the most stable corners of the unruly world of crypto investments.
It also represents a fall from grace for FTX’s chief executive, Sam Bankman-Fried. Over the last two years, the 30-year-old entrepreneur gained a reputation as one of the smartest, most trusted figures in crypto.
He built FTX into a $32 billion company. He spent hundreds of millions of dollars to prop up other struggling crypto companies. And he became a major political donor to Joseph R. Biden Jr.’s presidential campaign as well as a frequent, welcome presence in the halls of Congress.
Then, in a matter of days, it was Mr. Bankman-Fried who needed the bailout.
The collapse of his young empire was a hammer blow to the crypto market’s credibility. Mr. Bankman-Fried had said on Tuesday that he planned to sell his suddenly struggling company to Binance, an archrival. But Binance, without providing details, said concerns over reports “of mishandled customer funds” and unconfirmed investigations by U.S. regulators had prompted it to back out of the deal.
“Every time a major player in an industry fails, retail consumers will suffer,” Binance said in its statement. “We have seen over the last several years that the crypto ecosystem is becoming more resilient, and we believe in time that outliers that misuse user funds will be weeded out by the free market.”
FTX declined to comment on Binance’s pullout from the deal.
This is a developing story. Check back for updates.