In an unexpected twist, CZ, the CEO of Binance, declined a $40 million bid in March 2019 from ex-FTX CEO Sam Bankman-Fried to build a cryptocurrency futures exchange. In place, Binance, famous as a spot crypto exchange, took a gamble to cultivate its futures exchange, an intriguing divergence from its routine model.
There is an intriguing backstory about FTX’s fall and the elusive founder, as recounted in Michael Lewis’s book “Going Infinite”. When Zhao shrugged off the offer, Bankman-Fried, undaunted, laid the groundwork of the now infamous FTX exchange in May 2019. Despite the denouncement, Bankman-Fried viewed Zhao’s choice as quite common and mildly disheartening. Bankman-Fried had faith that Zhao had the capacity to be an engaging individual, but he fell short of the mark.
In comparison to traditional spot exchanges, futures exchanges enable traders to plunge into cryptocurrency trading using merely a part of their collateral. Bankman-Fried, however, didn’t have an easy path when he initiated to establish FTX. He was relatively under-recognized in the crypto space, which posed difficulties in gaining traction, bringing customers onboard, and establishing relevant connections.
Interestingly, Bankman-Fried took a shot at this as early as 2018, when he attempted a Bitcoin exchange start-up called CryptonBTC with a friend from Alameda Research, Gary Wang. Unfortunately, their venture couldn’t gain enough momentum due to the lack of promotion and user participation.
Having learned from past endeavors, Bankman-Fried aimed to pitch existing exchanges with the concept of a futures platform, considering Zhao as the most likely taker. He intended to counteract the risks of significant losses in futures trading by vigilantly observing trades and swiftly liquidating if they took a negative turn. His relentless efforts to create a user-friendly crypto future exchange catering to both retail and professional traders were commendable.
To ensure financial backing, Bankman-Fried introduced the FTX token (FTT), promising stakeholders a share of FTX’s annual revenues through a token buyback and burn mechanism. FTT garnered interest from external parties and even got listed on FTT, showing higher success than Bankman-Fried’s initial foray into the crypto world.
A chance encounter with Zhao at a crypto conference stoked his interest in Bankman-Fried leading to an offer for a 20% stake in FTX for $80 million, weeks later. The trial of Bankman-Fried, on account of various charges, is underway and expected to last six weeks. This progression underpins the volatile yet promising nature of the crypto world.
Source: Cryptonews
