On Friday, while testifying at his criminal trial, Sam “SBF” Bankman-Fried disclosed that he had planned to sell FTX to crypto giant Binance when his company was still in its early days.
The fallen crypto king testified that he designed FTX to carve out a niche that would undoubtedly make it an appealing buy target for an exchange like Binance.
Sam Bankman-Fried’s Shocking Testimony
As Sam Bankman-Fried teamed up with FTX co-founder Gary Wang back in 2019 to develop the now-defunct digital asset exchange in Hong Kong, he had a clear idea of how he wanted it to be. Bankman-Fried wanted FTX to focus on margin trading and give its clients the chance to make massive bets.
As per his court testimony in his criminal fraud and conspiracy trial, the former FTX mogul said he believed that the exchange would market itself as a venue that specialized in margin trading, an area that was not adequately addressed by exchanges back then. SBF thus testified that he hoped Binance, currently the world’s largest crypto exchange by trading volume, would become interested in acquiring FTX.
In its infancy, Bankman-Fried said FTX getting users was quite challenging, but it grew “by word of mouth” to the point where it became a profitable enterprise. FTX registered at least $20 million in revenue in 2019, SBF posited. By 2021, he told the court that FTX was seeing roughly $3 million in revenue daily.
The FTX founder and accused fraudster then recalled that one of the exchange’s early unique features was its cutting-edge risk engine. Unlike other crypto exchanges of the era, FTX’s risk engine, which decided when traders’ positions would be liquidated, ensured a more thorough view of customers’ accounts.
Moreover, SBF cited cross-margin trading as another part of FTX’s early selling points. Bankman-Fried explained that the feature enabled traders to utilize excess margin from one trade to fulfill margin requirements for other trades.
The FTX-Binance Drama
Binance had initially reached a deal to fully acquire its troubled rival FTX last year in return for covering the liquidity crunch at the embattled exchange. However, Binance eventually walked away from the potential acquisition deal, with CEO Changpeng Zhao noting that “the issues [with FTX] are beyond our control or ability to help.”
Although Binance was an early FTX investor, SBF’s exchange had bought its stake from Binance via a $2.1 billion mix of its failed token FTT and other assets.
During the trial, Bankman-Fried admitted that Binance’s BNB token had inspired them to create FTT. He also revealed that Binance was actually FTX’s first investor, doling out $80 million in BNB to the exchange as seed money.