By Michael Scott
The ex-FTX chief executive Sam Bankman-Fried confessed in his testimony that he founded FTX to serve a crypto niche. The disgraced crypto exchange founder indicated that he considered FTX would become a suitable target for Binance to acquire.
The deposed executive, following the sudden FTX implosion in November 2022, informed the court that he desired to sell the crypto exchange right from its infancy.
Bankman-Fried Confirms FTX Target for Margin Trading
Bankman-Fried recalled FTX beginning in Hong Kong to specialize in margin trading and facilitating the clients to make outsized bets.
The disgraced crypto executive admitted the objective to establish a niche for the now-bankrupt FTX exchange when working with co-founder Gary Wang back in 2019.
Bankman-Fried’s testimony on Friday emphasized that he considered FTX would readily become the venue catering for margin traders. He felt the specialty was inadequately unaddressed across the exchange ecosystem. Consequently, he considered an established exchange such as Binance would ultimately develop an interest in acquiring FTX.
Binance is the global leading crypto exchange in trading volume. The crypto exchange led by Changpeng Zhao was considered by Bankman-Fried likely to acquire FTX. True, Binance expressed interest in acquiring FTX, though by then, it was crumbling last year. Unsurprisingly, Binance would rule out the potential acquisition, indicating that FTX suffered many issues beyond its capability to resolve.
Bankman-Fried Recalls FTX Struggle at Onset
Bankman-Fried recalls the FTX journey he described as challenging to secure customers. Nonetheless, FTX leveraged word-of-mouth to build the business. By 2019, FTX realized an annual revenue of $20 million. By 2021, FTX was recognizing $3 million daily income.
The early selling point leveraged by FTX was the risk engine. Relative to other exchanges, FTX portrayed a risk engine that decided when traders could liquidate their positions. As such, FTX exercised a comprehensive scrutiny of the customers’ accounts.
FTX founder ruled out assertions he read and wrote the code during the building phase. Instead, he indicated that Wang wrote the code that built the exchange guided by his input on how the platforms should appear from a philosophical perspective.
FTX Targeted Specialty in Cross-Margin Trading
Bankman-Fried revealed in the Friday, October 27 testimony that he harbored an objective to offer cross-margin trading as its primary appeal during FTX establishment. Notably, the former FTX head indicated that the cross-margin trading feature allowed the users to leverage excess margin in a single trade to address requirements emerging in other trades.
Bankman-Fried decries that Binance hardly submitted the bid to acquire FTX early. Nonetheless, he admits to using the Binance internal team in developing his platform.
Binance Input in Downing Crypto Exchange FTX
Bankman-Fried address counsel Mark Cohen’s inquiry on the firm’s failed exchange token FTT. He labeled Binance’s BNB token as portraying critical inspiration. He hailed Binance as the initial investor in the FTX by issuing BNB valued at $80 million as seed financing.
FTX plunged into bankruptcy in November 2022 following the sharp decline in FTT, prompting the fatal rush of withdrawals. The exchange admitted its inability to satisfy the rush to exit en masse. The exchange added that it hardly matched reserves to the customer assets.
Bankman-Fried admitted buying out the Binance stake in FTX via a $2.1 billion offer of FTT blend with other assets. FTT would fall into the tailspin when Zhao-led Binance disposed of its token’s holdings.
Friday’s testimony illustrated that the FTX goal with the FTT targeted offering accounts benefits when held and conveyed several of the exchange’s successes. Bankman recalled that FTX ran an initiative that utilized a portion of its earnings to acquire FTT. The move would reduce the supply since it would burn the tokens acquired. The approach replicated the buy-back program executed by the public companies.