Did Binance Cause FTX’s Downfall? Bankman-Fried Alleges Balance Sheet Leak

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During an exhausting nine-hour testimony, Alameda’s CEO, Caroline Ellison unveiled essential information in the case. She exposed surprising facts, such as SBF’s attempt to manipulate Bitcoin prices and Binance’s suspected involvement in a data leak.

Now, all attention is on the revelation that Binance, a competitor of FTX, might have disclosed Alameda Research’s financial records to CoinDesk. This occurrence played a pivotal role in the decline of FTX and SBF’s cryptocurrency empire, marking a significant turning point in the industry.

The Memo that Shook FTX

In her testimony, Ellison highlighted a critical memo dated November 6, 2022. In this internal document, SBF outlined its plans to seek financial support from potential investors. The memo revealed SBF’s concerns about Binance’s alleged smear campaign, where they accused Binance of leaking sensitive financial data. According to SBF, Binance shared the balance sheet through blogs and provided it to CoinDesk. This single event set off a chain reaction that led to FTX’s dramatic downfall.

In an unexpected twist, DCG, the parent company of CoinDesk, held various crypto assets and businesses. However, due to the downturn in the crypto market, DCG had to divest some of these assets, including CoinDesk.

Read More: FTX-Alameda Bribery Scandal: Caroline Ellison Reveals $150M Payment to Chinese Officials

Behind the Scenes: SBF’s Strategic Moves

Within the same document, SBF identified Justin Sun, the founder of TRON and an advisor to the Huobi exchange, as a potential investor. However, he noted Sun’s close connections to Changpeng Zhao (CZ), Binance’s leader. Additionally, the document outlined various strategic actions that SBF planned to take, including a confidential tweet to influence public sentiment.

It is widely known that Binance was close to acquiring FTX. However, this potential acquisition triggered a series of events that led to FTX’s decline. Binance’s decision to sell a significant amount of FTX’s native token, FTT, caused a crisis in market confidence. Furthermore, they later withdrew from the acquisition of the now-defunct FTX. These events create a nuanced view of the relationship between the two exchanges, adding depth to the ongoing trial’s context.

Also Read: Sam Bankman-Fried Was Manipulating Bitcoin Price to Stay Under $20,000, Ellison Claims

FTX’s Financial Position

The memo also offered insights into FTX’s financial status at that time. While the exchange boasted substantial capitalization, it fell short of infinite liquidity. Out of the $12 billion in client assets held on the exchange, only approximately $4 billion was readily available for processing withdrawals.

What Next? 

SBF currently faces numerous fraud charges, with a separate trial scheduled for March 2024, involving allegations of bank fraud and foreign bribery conspiracy. As Caroline Ellison prepares for cross-examination by the defense, we can expect more layers of complexity to unfold in this high-stakes trial.