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New publication discloses that Binance CEO CZ turned down SBF’s $40 million proposal for a futures exchange.
Binance CEO Changpeng “CZ” Zhao reportedly refused to pay $40 million to former FTX CEO Sam “SBF” Bankman-Fried for a futures crypto exchange in March 2019, as noted in an excerpt from Michael Lewis’ book Going Infinite: The Rise and Fall of a New Tycoon.
The book indicates that SBF proposed a futures exchange with “zero risk” in the event of unfavorable trades involving high leverage. Typically, a futures exchange enables traders to leverage their funds against a minimal collateral, and the exchange frequently requires traders to augment their collateral if a trade begins to decline.
In the cryptocurrency market, price fluctuations can be rapid and substantial, potentially resulting in exchanges facing bad debts due to insufficient collateral. However, FTX aimed to establish a futures exchange that would track the trader’s actions and, once the trade exceeded the collateral, would liquidate the user’s positions, thereby minimizing any possible losses for the exchange.
The book suggests that at the time of SBF’s proposal in 2019, Binance and FTX had distinct objectives. FTX sought to serve institutional investors, while Binance focused on retail clients. After considering the proposal for several weeks, CZ reportedly rejected SBF’s funding request and proceeded to develop an internal futures platform.
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The author of the book asserts that CZ’s choice was not well received by SBF, who allegedly referred to the Binance CEO as a “douche” for his decision. Following Binance’s refusal, FTX launched its own FTX futures exchange in 2019 but was uncertain about its potential success. An excerpt from the book quoting SBF states:
“If it works it is worth billions of dollars, but I thought there was a better than fifty per cent chance it wouldn’t work. I’d never done marketing. I’d never talked to the media. I’d never had customers. It was just different from anything that I’d ever done.”
This was not the only occasion when SBF and CZ interacted. In 2022, when the FTX liquidity crisis emerged, FTX approached Binance once more for a potential acquisition, but CZ declined, asserting that the platform was beyond recovery.
Related: Latest update — Former FTX CEO Sam Bankman-Fried trial [Day 1]
The latest disclosure arises as the trial of the former FTX CEO commences in New York, where he faces numerous charges of fraud and money laundering related to the downfall of FTX.
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