In an October 27 court hearing, the founder of the FTX, Sam Bankman Fried, revisited some of the plans he had for the now-defunct crypto exchange. Shortly after the launch of FTX, the crypto mogul planned to sell his venture to the world’s largest crypto exchange, Binance.
In the early stages of FTX, Bankman Fried confessed that he planned to offer a unique financial product, such as margin trading, to enable the customers to cap their debts. Margin trading is an exclusive financial product allowing customers to buy and sell their assets through borrowed funds.
FTX Planned to Introduce Cross-Margin Trading
In 2019 Bankman Fried deliberated with his business partner Gary Wang about the new product that will propel FTX to generate substantial gains. While establishing FTX Hong Kong Bankman explained the need for FTX to fill the existing gaps in margin trading sector.
In the initial development stages of FTX, the crypto mogul admitted that he mandated Wang to lead in formulating the crypto exchange code. The executive recognized the work done by Wang in building FTX. He confessed that at the infancy of FTX, he only provided valuable input based on philosophical persective.
At that time, the crypto investor noted unaddressed matters in the margin trading. Despite the risk associated with margin trading, Bankman Fried pointed out that this investment was more profitable compared to traditional trading.
The investor confessed that before leaving Alameda Research to start FTX, he planned on offering cross-margin trading. According to Bankman Fried, margin trading enables traders to utilize the surplus margin when buying and selling digital assets. He noted that the excess margin was only used to meet the margin trading requirements.
The executive anticipated that specializing in margin trading would push the FTX to growth stage.
Binance Abandoned Plans to Acquire FTX
Based on the market performance of crypto assets in 2019, the former FTX CEO regretted that getting customers was more challenging. The executive devised multiple marketing strategies to broaden FTX’s customer base.
He noted that referrals and word of mouth were effective strategies for onboarding more customers to FTX. The report demonstrated that the FTX team utilized a unique risk engine to gain a competitive advantage in a vibrant crypto market.
The embattled crypto exchange adopted a risk engine approach to examine the customer accounts and identify the users with the possibility of being liquidated.
A review of FTX’s financial report illustrated that in 2019, the Bahamian crypto exchange FTX generated $20 million in revenue. Bankman Fried noted that the crypto exchange mushroomed in 2021 after yielding $3 million daily.
He anticipated that the expected growth of FTX would attract the investors’ attention. Having broad experience in crypto matters, Bankman had established a solid network with key players in the digital sector.
Relationship Between Binance and FTX
He projected that Binance would acquire FTX at an undisclosed amount. In an earlier post, the Binance team had announced plans to acquire the bankrupt crypto exchange to introduce a liquidity offering.
The Binance plans failed to materialize after the impolsion of FTX in November. Besides withdrawing from the acquisition deal, the Binance team cut ties with FTX and its top executives.
A statement from the Binance chief executive Changpeng “CZ” Zhao announced divorcing FTX for misappropriation of customers’ funds. The Binance CEO regretted that he was not in a position to support FTX due to the complexity of the matter.
The executive admitted that Binance was still contemplating acquiring FTX and the process was at its initial stages. According to the court report, Binance was an FTX active client and supported the exchange in attaining its primary objective.
The report demonstrated that Binance contributed $80 million in Binance Coin (BNB) in the FTX seed funding round.
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