Jon Rice

From the moment Changpeng ‘CZ’ Zhao announced that he was looking to acquire Sam Bankman-Fried’s FTX, skeptics noted that there was one question that didn’t seem to have an obvious answer.



Why bother?



After all, CZ had already essentially driven his rival to the point of insolvency, ruined his reputation, and virtually shut down his business.



So what would Binance have to gain from acquiring a balance sheet that allegedly contains a hole somewhere in the vicinity of $6 billion?



Customers, might be the obvious answer. FTX was the third-largest global exchange by volume, prior to its implosion.



But FTX was already in freefall following CZ’s very public campaign against SBF. Customer faith waned fast as the Binance CEO’s litigation of his concerns intensified, and it’s likely that many of them would have found a new home with Binance anyway.



How about a new foothold in the USA? FTX doesn’t admit US customers, so that makes no sense. And although at one point, Binance returned to the table — albeit briefly — to ask SBF to sweeten the deal and <a href="https://cms.blockworks.co/news/1-binance-ftx-deal-is-off-unless-ftx-us-is-part-of-the-package-source/" target="_blank" rel="noreferrer noopener">throw in FTX.US</a>, this was never a realistic possibility given Binance’s multiple legal entanglements in the US.



Maybe he was attempting to spare contagion in the markets that could have undermined his own entity? As the one who propagated the narrative, we’d have to assume Zhao was taken by surprise by the market reaction. And given his masterclass in the Art of War, that feels like a stretch.



<h3 class="wp-block-heading">What was CZ really trying to achieve?</h3>



In fact, it’s hard to find a reason why CZ would be interested in FTX. Its tech wasn’t revolutionary, and its overlap with his existing business simply doesn’t make sense.&nbsp;The market dominance he&#8217;d achieve might even make regulators more inclined to pursue him.



So we’re left with a hypothesis.



Despite his denial that Binance had any kind of ‘master plan’ going into this public feud, we might reasonably imagine that the exact opposite is true. And that perhaps CZ intended to decimate his rival, to utterly defeat him in such a way that there could never be any comeback for the one-time wunderkind of crypto.



And perhaps rather than merely speculate, we can examine the actions, not just the words, of a man who <a href="https://twitter.com/cz_binance/status/1538555154508746754?s=20&amp;t=MG8iDNZ0HmeNreJMGQcJtA">tweeted</a> a Sun Tzu quote in June of 2022: “In the midst of chaos, there is also opportunity.”



And boy, was there a whole lot of chaos this week.



We don’t know — and few appear to have asked — where CoinDesk obtained the partial Alameda balance sheet that started this whole thing. (The same reporter broke the story that Binance was considering backing out of the deal a few days later.)



But given what happened after their story appeared, cui bono?



<h3 class="wp-block-heading">Using the media to destroy your opponent</h3>



We have previously not reported that Binance reached out via both official and unofficial channels to two reporters at Blockworks to draw attention to negative articles and third-party research about Sam Bankman-Fried, and to discuss that our media outlet “should look into him”.



Two of these contacts were on October 26th, several days before Alameda’s balance sheet was published by CoinDesk. The other was on November 4th, a couple of days later.



And there’s CZ’s weaponization of Twitter to consider too. For someone who has claimed on multiple occasions not to support Fear, Uncertainty, Doubt (FUD), it’s hard to imagine that publicly announcing you’re liquidating hundreds of millions of dollars of your competitor’s exchange token is anything other than a declaration of war…and a precursor to a crypto bank run.



In later tweets he name-checked LUNA, the failed algorithmic stablecoin project — just in case we didn’t get it the first time — and dutifully posted that “we won’t support people who lobby against other industry players behind their backs” in a clear reference to Bankman-Fried’s reportedly less-than-kind comments about Binance to US legislators.



(It’s also worth noting the timing of this whole affair. SBF had just gone through a grueling public battle over his thoughts on DeFi regulation, which had weakened his public standing considerably for the first time.)



Even if Binance didn’t have Alameda’s balance sheet in its possession, and had no part in leaking it to the press, Zhao’s actions led to the value of FTT dropping precipitously, which — given that the token appeared to be backing loans at FTX — created exactly the conditions for lenders to pull back loans collateralized by FTT. (There is no excuse for FTX’s actions here, by the way, especially if customer funds were involved. It’s appalling, stupid, and possibly illegal. But that’s for another story.)



Fast forward to the announcement that Binance had a non-binding letter of intent to purchase FTX. And later that same day, another tweet:



“Two big lessons:&nbsp;



1: Never use a token you created as collateral.&nbsp;



2: Don’t borrow if you run a crypto business. Don&#8217;t use capital &#8220;efficiently&#8221;. Have a large reserve.”



<h3 class="wp-block-heading">No intention to buy FTX in the first place?</h3>



According to some sources, Binance was ready to pull out of buying FTX after just half a day of due diligence. And when Binance finally announced that they were pulling out of the deal, the price of FTT crashed by yet another 50%, cratering in total by 90% over the course of a week.



Did CZ really intend to buy FTX? A company that he systematically destroyed, publicly and ruthlessly?&nbsp;



Or is it beyond the realm of imagination to suggest that it was merely a ruse to achieve the complete and permanent annihilation of Sam Bankman-Fried’s reputation? Even SBF appears to acknowledge the possibility that this was all a game, in an unverified series of leaked <a href="https://twitter.com/cobie/status/1590610757334728704?s=20&amp;t=ipb7Ug60dE_kf5-lmBIILw" target="_blank" rel="noreferrer noopener">Slack</a> messages. This is but one theory. Byron Gilliam, master of crypto narratives and Blockworks&#8217; resident newsletter writer (<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">sign up</a>, it’s great) <a href="https://cms.blockworks.co/newsletter/view/?id=29650985" target="_blank" rel="noreferrer noopener">observed a different possibility</a>: That CZ was as astonished as the rest of us. &#8220;But maybe he was just pissed at SBF?



He may not have had any idea what chain of events he’d set off by publicly casting aspersions at his rival and threatening to market-sell his FTT.”



Observers have suggested that the war has set crypto back three, four, even five years.



Even for CZ and his billions, surveying the wreckage that he and Sam have wrought, this must feel like a Pyrrhic victory.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Did CZ Really Have Any Intention of Buying FTX?

Ben Strack

<div id="highlights-block_62910d4425afa" class="highlights">
 <ul>
 <li>Regulation is “essential” for mainstream crypto adoption, Binance CEO says</li>
 <li>The exchange registered as a digital asset service provider in France earlier this month</li>
 </ul>
 
</div>



The world’s largest crypto exchange has gained regulatory approval in Italy as it continues its expansion to new regions.&nbsp;



Binance Italy has registered as a cryptocurrency service provider with the Organismo Agenti e Mediatori (OAM) — a requirement under the country’s legislation. The approval allows the company to offer crypto products to customers in Italy, as well as open offices and expand its team in the country.&nbsp;



“Clear and effective regulation is essential for mainstream adoption of cryptocurrencies,” Binance CEO Changpeng Zhao said in a statement. “Binance has always put its users first and, with actions such as the implementation of the register, they can be confident that our platform is among the safest and most trustworthy in the world.”



A Binance spokesperson did not immediately return a request for comment about specific products it could look to offer in Italy or other regions in which it is seeking regulatory approval.&nbsp;



The news follows Binance’s registration earlier this month as a digital asset service provider in France by the Autorité des marchés financiers (AMF).&nbsp;



Binance France CEO David Princay called the registration “a key milestone for crypto in Europe,” noting that the new levels of protection for anti-money laundering will help grow crypto adoption and liquidity across the continent.&nbsp;



The crypto exchange also <a href="https://cms.blockworks.co/binance-granted-license-to-operate-in-dubai/" target="_blank" rel="noreferrer noopener">gained a virtual asset license from Dubai’s regulator</a> in March, allowing it to offer limited exchange products and services to pre-qualified investors and professional financial service providers. 



Binance has previously ended up at odds with regulators over its alleged failure to apply or register for financial services licenses. Zhao said in <a href="https://www.binance.com/en/blog/from-cz/a-letter-from-our-ceo-reflecting-on-progress-and-the-road-ahead-421499824684902301" target="_blank" rel="noreferrer noopener">a July 2021 blog post</a> that compliance is a journey.



In addition to the company’s recent regulatory approvals, Binance’s focus on compliance has percolated to its hiring and partnerships. Binance.US <a href="https://cms.blockworks.co/latest-in-crypto-hiring-binance-us-doubles-down-on-compliance/" target="_blank" rel="noreferrer noopener">hired</a> Josh Wilsusen as its first chief policy officer this week and also <a href="https://cms.blockworks.co/latest-in-crypto-hiring-chainlink-labs-binance-us-3iq-make-key-additions/" target="_blank" rel="noreferrer noopener">recently added</a> former Uber Technologies executive Krishna Juvvadi as its head of legal. 



<a href="https://cms.blockworks.co/binance-to-tighten-kyc-and-sanctions-screening-to-address-exchanges-risk/" target="_blank" rel="noreferrer noopener">Binance also partnered</a> with data analytics firm Kharon and cloud-native screening provider Neterium this week to better detect illegal crypto activity on its platform.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Binance Gains Regulatory Approval in Italy

<div id="highlights-block_6282bf96cbaae" class="highlights">
 <ul>
 <li>Crypto companies&#8217; latest deals are part of an effort to develop mainstream awareness of their brands internationally</li>
 <li>Binance, WhaleFin, Tezos, OKX and Crypto.com are a few of the companies that are investing in sponsorships all over the world</li>
 </ul>
 
</div>



Crypto markets may be down, but trading platforms are still pouring truckloads of money into sport sponsorships.



Last week, Binance, the world’s largest crypto exchange, <a href="https://www.binance.com/en/blog/markets/binance-is-the-new-exclusive-crypto-sponsor-of-brasileir%C3%A3o-421499824684903828" target="_blank" rel="noreferrer noopener">announced</a> that it would be the exclusive crypto sponsor of Brasileirão, the leading soccer tournament in Brazil, for the next three years. As with other markets, Binance Launchpad will be used to develop NFTs and fan tokens, digital assets that offer interactivity and benefits for holders.



The sponsorship is “important to help expand crypto adoption and generate positive impact for our users, the crypto and blockchain community and society as a whole in Brazil,” Changpeng “CZ” Zhao, Binance CEO, said in a statement.



In Brazil, the company is already a sponsor of other major clubs such as Santos FC.



Crypto companies hope to reach more retail investors through soccer clubs with huge global reach via broadcast deals and social media accounts numbering in the millions of followers.



Binance’s investment in Brazil included an acquisition, pending approval from the central bank, of Sim;paul Investimentos, a Brazilian exchange that already has regulatory authorization in the country. Recently, Brazil’s Senate approved a draft bill to create rules for crypto in the country.



Binance, earlier this year, <a href="https://www.binance.com/es-AR/blog/community/la-asociaci%C3%B3n-del-f%C3%BAtbol-argentino-presenta-a-binance-como-nuevo-main-sponsor-global-y-fan-token-oficial-421499824684903342" target="_blank" rel="noreferrer noopener">became the main global sponsor</a> of the men&#8217;s national soccer team in Argentina, where soccer passion is as big as it is in Brazil. The five-year deal marks the first time that the exchange sponsored a national team. Argentina will play in FIFA’s World Cup later this year in Qatar.



In Portugal, another country known for its love of soccer, the 2022 championship winner FC Porto, also counts Binance as a sponsor. The terms of the deal were not disclosed. Binance and the renowned soccer club jointly launched a token called FC Porto Fan Token, which lost 74% of its value in the last month, going from $14 to just $1.40.



In Italy, Binance sponsors Lazio, which ranks in fifth place in Serie A, the Italian soccer championship.



And Binance is not alone. WhaleFin, a trading platform for digital assets, will pay 20 million pounds to sponsor Chelsea Football Club’s shirt sleeve in the next season, according to the <a href="https://www.ft.com/content/9f0c4272-a1ff-47cf-8bd6-4c90f1cd2843" target="_blank" rel="noreferrer noopener">Financial Times</a>. Previously, another Premier League team, Manchester United, struck a sponsorship deal with blockchain platform Tezos. Manchester City, which won the British championship this year, has a global sponsorship deal with crypto exchange OKX.



Although soccer is an obvious option for sponsorship deals in Europe and South America, other sports are in the running for crypto dollars. Cryptocurrency exchange Crypto.com, which counts <a href="https://cms.blockworks.co/crypto-com-cmo-on-how-company-went-from-app-to-global-brand/" target="_blank" rel="noreferrer noopener">actor Matt Damon</a> among its hired marketing guns, became Formula 1’s global partner in 2021 in a deal worth $100 million, according to <a href="https://www.cnbc.com/2021/06/29/formula-1-strikes-100-million-cryptocurrency-sponsorship.html" target="_blank" rel="noreferrer noopener">CNBC</a>, and more recently launched a nine-year deal Miami Grand Prix’s as official title partner.



Later this year, Crypto.com will also be one of the many <a href="https://cms.blockworks.co/crypto-com-adds-fifa-world-cup-sponsorship-to-sports-marketing-strategy/" target="_blank" rel="noreferrer noopener">World Cup official sponsors</a>, alongside companies such as Qatar Airways, Adidas, Coca-Cola, Wanda, Hyundai and Visa.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

Latest Crypto Sponsorships: Binance Goes To Brazil, WhaleFin Partners With Chelsea FC

<div id="highlights-block_62743684a6bff" class="highlights">
 <ul>
 <li>Binance is considering what role BNB Chain can play in the future of Twitter, company representative tells Blockworks</li>
 <li>The exchange can help Twitter unleash the power of crypto payments, Delta Blockchain Fund founder says</li>
 </ul>
 
</div>



Binance is among 18 investors backing Elon Musk’s $44 billion bid to purchase Twitter, a move industry participants dubbed an effort to expand the crypto exchange’s revenue streams from trading fees.&nbsp;



In a curious, unexpected move for a crypto company, Binance pledged a $500 million commitment toward the Tesla founder’s expected acquisition of the social media platform, according to <a href="https://www.sec.gov/Archives/edgar/data/0001418091/000110465922056055/tm2214608-1_sc13da.htm" target="_blank" rel="noreferrer noopener">an SEC disclosure</a> filed Wednesday.



While social media platforms have been a core feature of Web2, a Binance spokesperson told Blockworks, the company sees “tremendous opportunity” in helping Twitter expand its capabilities.



“We believe that Web3 may have an equally important role in the future of social media platforms, including Twitter,” the spokesperson said. “Web3’s focus on decentralization could help facilitate greater transparency, accountability and freedom of expression for all users.”&nbsp;



Binance is assembling a team to focus on how blockchain and crypto could be helpful to Twitter and other social media platforms.&nbsp;



“For example, what role can BNB Chain play in the future of Twitter?” the spokesperson said.&nbsp;



<a href="https://www.binance.com/en/blog/ecosystem/introducing-bnb-chain-the-evolution-of-binance-smart-chain-421499824684903436" target="_blank" rel="noreferrer noopener">BNB Chain</a>, which the company unveiled in February, comprises Binance Chain and <a href="https://academy.binance.com/en/articles/an-introduction-to-binance-smart-chain-bsc" target="_blank" rel="noreferrer noopener">Binance Smart Chain</a>. BNB, formerly called Binance Coin, stands for build and build. The chain aims to build the world’s parallel virtual ecosystem infrastructure.



<h3 class="wp-block-heading">Industry watchers weigh in&nbsp;</h3>



Musk’s <a href="https://cms.blockworks.co/elon-musk-secures-44b-deal-for-social-media-platform-twitter/" target="_blank" rel="noreferrer noopener">bid</a> was unanimously approved by Twitter’s board of directors last month and is expected to close sometime this year, subject to stockholder approval.



Morningstar Equity Analyst Michael Miller said Binance’s investment reflects the interest of the company, as well as other exchanges in the space, to expand beyond crypto trading. Coinbase executives, for example, have noted the company’s focus on <a href="https://cms.blockworks.co/coinbase-expects-softer-first-quarter-after-strong-q4/" target="_blank" rel="noreferrer noopener">diversifying its revenue streams</a> in 2022. 



“But the focus is still within the greater blockchain-powered Web3 world — where [Binance is] really looking at a lot of these decentralized apps and how they can be integrated into other platforms and co-exist with them — really being in that ecosystem and owning it as it grows,” Miller said.&nbsp;



The $500 million pledge follows Binance’s <a href="https://www.forbes.com/sites/forbespr/2022/02/10/forbes-announces-200-million-strategic-investment-from-binance/?sh=314d0fbd57e2" target="_blank" rel="noreferrer noopener">$200 million investment</a> in media company Forbes. Binance Founder Changpeng Zhao said at the time that “media is an essential element to build widespread consumer understanding and education.”



Miller also pointed to Binance’s acquisitions of CoinMarketCap and DappReview, which were announced in 2020 and 2019, respectively.&nbsp;



“These don’t really speak directly to buying and selling bitcoin, but they do speak to that sort of larger ambition,” he said.



Kavita Gupta, founder of the Delta Blockchain Fund, called Binance’s contribution a smart decision. Twitter co-founder Jack Dorsey has only supported bitcoin and <a href="https://cms.blockworks.co/twitter-users-can-now-get-paid-in-bitcoin/" target="_blank" rel="noreferrer noopener">limited tipping to just one currency</a>, she said, noting that the company has not yet reached its full potential.



Gupta added she envisions having a wallet on Twitter to maintain tokens, transact with non-fungible tokens (NFTs) globally and analyze credible ratings on products and influencers based on activity.



“Telegram, WeChat and many others have tried to be the primary space for social conversations and payment,” Gupta told Blockworks. “But Twitter displays the largest potential to be that center point, especially for the crypto community and exchanges like Binance, who can really unleash the power of crypto payments and token launches from the heart of crypto conversation on Twitter.”



Haohan Xu, CEO of digital asset trading network Apifiny, said how Web3 will transform social media aligns with Musk’s purported vision to redistribute power on Twitter back to individuals.&nbsp;&nbsp;



“Cryptocurrencies commonly play the role as the medium of exchange or a representation of value in Web3 ecosystems,” Xu said. “As the largest cryptocurrency exchange in the world, Binance naturally wants to participate and accelerate that process.&#8221;



<h3 class="wp-block-heading">Other investors</h3>



Venture capital firm a16z also pledged $400 million, according to the filing. The investment follows the company’s launch of <a href="https://a16z.com/2022/04/21/announcing-a16z-crypto-research/" target="_blank" rel="noreferrer noopener">a crypto research lab</a>.



The company in a blog post said one of the most pressing Web3 questions is “how to best build token economies into consumer-facing web3 applications like games and social networks.”



Ben Horowitz, a16z’s co-founder, <a href="https://twitter.com/bhorowitz/status/1522198627128553472" target="_blank" rel="noreferrer noopener">tweeted</a> that the social network has issues including bots, abuse and censorship — exacerbated by the company’s reliance on ads.



“Elon is the one person we know and perhaps the only person in the world who has the courage, brilliance and skills to fix all of these and build the public square that we all hoped for and deserve,” he said.



Fidelity Management &amp; Research Company, the investment adviser to Fidelity mutual funds, committed $316 million, according to the filing. Fidelity Investments this year <a href="https://cms.blockworks.co/fidelity-launches-metaverse-experience-in-tandem-with-new-etfs/" target="_blank" rel="noreferrer noopener">launched blockchain and metaverse ETFs</a>, created a financial education experience in Decentraland and <a href="https://cms.blockworks.co/fidelity-delves-deeper-into-crypto-by-allowing-bitcoin-in-401ks/" target="_blank" rel="noreferrer noopener">announced its bid </a>to allow workers to earmark a portion of their retirement savings to bitcoin.



A Fidelity spokesperson declined to comment, saying “we don’t discuss specific companies or investment decisions.” Venture capital firm Sequoia, meanwhile, has committed $800,000, the disclosure indicates. The company <a href="https://cms.blockworks.co/sequoia-capital-is-raising-up-to-600m-in-new-sub-fund-to-focus-on-tokens/" target="_blank" rel="noreferrer noopener">revealed in February</a> it was getting set to launch a sub-fund focused on liquid tokens and digital assets.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.