Binance has tweeted that it’s not going to be providing FTX with liquidity, just days after it said it might in a non-binding deal. What seems to have prompted Binance’s withdrawal is the fact that the U.S. Securities and Exchange Commission (SEC) announced an investigation into FTX over the mishandling of customer funds. The SEC will also look to see if FTX followed laws about segregating customer assets and trading against customers.
The announcement on Twitter was a four-tweet thread. Over the course of these tweets it said that it initially wanted to help FTX’s customers by providing liquidity to the platform, but the existing issues, it says, are beyond its control or ability to help. The company went on to say that each time a big exchange fails, retail customers will suffer. It said as time goes on, players that misuse funds will be “weeded out by the free market.” Binance believes that regulatory frameworks and greater decentralization will lead to a stronger ecosystem.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.— Binance (@binance) November 9, 2022
On the back of the FTX turmoil, the price of many cryptocurrencies has fallen. The biggest of all the cryptos – Bitcoin – has even put in new lows, touching around $15,500. Since reaching lows yesterday, the price seems to be recovering somewhat, but has quite a bit of ground to make up for. The FTX Token is sitting at just over $2, down from around $22 a few days ago – the future of this crypto certainly doesn’t seem bright based on FTX’s position right now.
The fact that any of these centralized exchanges can become insolvent at any moment and freeze user funds highlights the importance of holding your crypto in a wallet that you control, rather than on an exchange. With a wallet, you have to protect your private key or seed phrase yourself, but you are never deprived access because you control the wallet.
It’s unclear now what FTX will do or how users of that exchange will recover their funds. There’s always the possibility that users could retrieve a portion of their funds through the legal system, but going down that avenue is likely to be a long, drawn-out process.