crypto strategy

Binance exec says ‘it was like a bomb went off’ at FTX, compares Bankman-Fried to Madoff and Elizabeth Holmes

Binance chief strategy officer says it took his company two hours of due diligence on FTX to determine Sam Bankman-Fried’s crypto exchange was beyond savings.

“It was like a bomb had gone off there,” Binance CSO Patrick Hillmann told CNBC on Thursday. “You know, we’re getting calls, people are crying. … It was complete pandemonium there,” Hillmann said, adding that when “Sam went completely silent, the whole organization fell apart.”

FTX is spectacular collapse Last week first came to light when Binance, the world’s largest cryptocurrency exchange, said on November 8 that it had signed a non-binding agreement to acquire its smaller rival for an undisclosed sum. FTX was in the midst of a liquidity crisis, with customers demanding billions of dollars in withdrawals per day. This was money that FTX did not have, as it used customer deposits for other purposes.

Binance technically had 30 days to explore a deal, but the next day it waived rescue plan, saying in a statement that “FTX’s issues are beyond our control or our ability to help.” As an early investor in FTX, Binance was familiar with the business.

“Somehow they were always spending more and more and more and more money“, Hillmann said. “We never understood where the money was coming from. It just never made sense to us.”

FTX’s lavish spending included a $135 million deal for the naming rights to the NBA’s Miami Heat arena, a Super Bowl commercial featuring comedian Larry David, and sponsorship of Formula 1.

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“For us, if there’s smoke, there’s probably fire,” Hillmann said. “I don’t think we could have ever realized exactly how much fire was burning inside.”

Hillmann said lawmakers and venture capitalists apparently were drawn to Bankman-Fried’s personality and his appearance of credibility. He said the FTX founder either looked like Theranos’ Elizabeth Holmes, who Hillmann said was “completely delusional,” or Bernie Madoff, who was “manipulative” and created a “cult of personality.”

“There is no middle ground,” Hillmann said. “It’s one of the two.”

CNBC contacted FTX, which did not respond to Binance’s accusations. Bankman-Fried, who resigned from the company and was replaced as CEO by restructuring expert John Ray III, says he is still trying to get a financing deal done in a way that can help depositors.

Ray, who was in charge of the restructuring of Enron, FTX slammed Thursday morning in a filing with the U.S. Bankruptcy Court for the District of Delaware, saying that in his 40 years in the business he had never seen “such a complete failure of corporate controls.” FTX said Bankman-Fried no longer speaks for the company.

Hillmann said that initially there were some concerns with FTX and its unsavory relationship with Alameda Research, Bankman-Fried’s hedge fund. However, the company had raised funds for a $32 billion valuation from high-profile investors, and Bankman-Fried made several trips to Washington, DC, to testify before lawmakers. He was also a major contributor to Democratic political campaigns, while another leader, Ryan Salame, was a major Republican donor.

“We would just assume that because of the scale and level of engagement they have with some of the most powerful people on this planet, those checks and balances naturally have to be there for those people to agree to be part of their work,” Hillmann said.

LOOK: Binance Decided FTX Is Beyond Savings After Two-Hour Balance Sheet Review

Binance has decided that FTX is beyond saving after a two-hour review of the company's balance sheet

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