Binance CEO Changpeng “CZ” Zhao reportedly declined to pay $40 million to former FTX CEO Sam Bankman-Fried (SBF) for a futures crypto exchange in March 2019, according to an excerpt from Michael Lewis’ book Going Infinite: The Rise and Fall of a New Tycoon.
According to the book, SBF proposed a futures exchange with “zero risk” in case of bad trades with high leverage. Traditionally, a futures exchange allows traders to leverage funds against a small collateral, and the exchange often asks traders to increase collateral if the trade starts to go bad.
In crypto, price swings can be fast and significant, which could leave exchanges with bad debts due to a lack of collateral. However, FTX wanted to create a futures exchange that would monitor the trader’s activity and, as soon as the trade surmounted the collateral, would liquidate the user’s positions, thus limiting any potential losses to the exchange.
The book suggests that at the time of SBF’s proposal in 2019, Binance and FTX had different goals. FTX wanted to cater to institutional investors, while Binance was all about retail customers. After pondering the proposal for a few weeks, CZ reportedly denied the request for funding from SBF and went on to create an in-house futures platform.
The author of the book claims that CZ’s decision didn’t go down well with SBF, who reportedly called the Binance CEO a “douche” for his decision. After the denial from Binance, FTX created its own FTX futures exchange in 2019 but wasn’t sure about its success. An excerpt from the book quoting SBF reads:
“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 incident when SBF and CZ crossed paths. In 2022, when the FTX liquidity crisis came to light, FTX reached out to Binance again for an acquisition, but CZ declined, claiming the platform was beyond redemption.
Related: Latest update — Former FTX CEO Sam Bankman-Fried trial [Day 1]
The latest revelation comes as the former FTX CEO’s trial kicks off in New York, where he faces multiple charges of fraud and money laundering in connection to the collapse of FTX.
Magazine: Can you trust crypto exchanges after the collapse of FTX?