Binance backs out of FTX acquisition amid precarious crypto market

Yahoo Finance Live anchors discuss reports that Binance has backed out of their FTX.com takeover deal.

Video Transcript

- Binance is backing out of its plans to acquire FTX. The crypto exchange platform said in a tweet Wednesday that they have ended their pursuit of FTX's non-US businesses just one day after announcing a non-binding agreement. Now, this came as a result of corporate due diligence, stating that the issues surrounding the platform are beyond the control of Binance. Forget it was all good just a week ago. Just one day ago, this was far different in terms of the deal, the mega deal, what it would have meant for crypto more broadly.

And I think now that we've watched this reversal, it really signals this question of, well, what's really going on under the hood at FTX? And we've started to see even the internal messages that have leaked see what's taking place. There are employees, rather, that might not be getting paid right now due to some type of payroll issue. You've got Sam Bankman-Fried that's going to be looking for more funding as well. There are a host of issues that they really have to get their hands around right now.

- Right. And I do want to highlight some original reporting by the Yahoo Finance team here. First, our very own Jared Blikre you in the Morning Brief newsletter calling this a defining moment for the crypto industry, comparing to some of the things that he saw and then of course even I saw back covering Lehman Brothers. Now, obviously, this is not systemic risk because not every household owns crypto like they owned a home or a bank account. Different situation.

But it is systemic inside the crypto industry. So that's a good point there by Jared here. I encourage everyone to go check out that Morning Brief. Next by our crypto reporter David Hollerith. He's been working the phones around the clock, talking to a lot of sources. Note-- Sam Bankman-Fried mentioned in a letter this morning or late yesterday that Tron, or Justin Sun, would maybe potentially look to bail his company out.

David is reporting, according to his sources, that this is more about saving Tron's own ecosystem than trying to save FTX. So those looking for an FTX bailout at the hands of Justin Sun may want to think again. And lastly, Galaxy Digital. Mike Novogratz-led firm. They're on the hook for what might be $47 million. That might go completely up in smoke. That is the money they have within FTX, about 15% of the money they hold in their crypto exchanges. So this is very much a spreading and developing situation.

- A few things. And I think you rightly pointed out the great reporting that our team is doing, but at the same time, the impacts that this has to some of the next generation of investors. We've talked time and time again about the number of millennials and Gen Z investors that have owned crypto, added that to their portfolio at one point or another.

When you see a sell off like this, it not only impacts, of course, the major companies that hold crypto on their balance sheet to the tune of millions, if not billions, of dollars in some cases, companies like a Block or a PayPal or a MicroStrategy or even a Tesla, but it also impacts all of those next generation of investors that were looking for or banking on some type of new decentralized financial system to really have the opportunity to not only be an investment vehicle, but to carry value for an extended period of time. And right now with this crypto winter and this wash out, one of our guests called this back in June.

And it was Anastasia Amoroso, who was actually just sitting in the chair with us a couple of days ago. And she said it. She said $15,000 might be the realistic price level bottom here for this crypto winter. Where did Bitcoin strike just last night? It was about $15,717. So with all of that in mind, we're still going to continue to see how this is impacting individuals' balance sheets, but also some of those major corporations' balance sheets as well.

- Right. And the next thing to look out for-- who bails out FTX? Is it another financial institution? Is that how they ultimately gain their access to crypto because by the way Bankman-Fried is talking, they need $8 billion-plus. It's unclear if that might even be enough. So who takes in here and takes that risk?

- This is the net worth chart as well. You were talking about this in our morning meeting. His net worth has fallen off a cliff with this decline. And just lastly on this, it does signal a question of how some of the regulators may be thinking about this as well. Gary Gensler out in interviews this morning saying that the crypto world toxic combination-- or calling it a toxic combination of business activities. And the runway is running out for crypto exchanges to register as well.