The relationship between Binance and FTX has long been one of the most contentious rivalries in the crypto world. Now, Changpeng Zhao (CZ) is offering one of the most detailed public accounts ever.
CZ explains how cooperation turned into competition well before FTX went bankrupt in 2022.
CZ initiates secret breakup with Binance and FTX
Speaking on the All In Podcast, the former Binance CEO said their relationship dates back to early 2019, when he first met Sam Bankman Fried (SBF), who was running Alameda Research at the time.
“Well, I think the first time I met him was in January 2019 at a conference in Singapore hosted by Binance. I don’t think FTX existed at the time… Sam… was running Alameda,” CZ said, recalling that Alameda was a major trading customer of Binance at the time and that the relationship was initially friendly.
According to CZ, Alameda and the future FTX team immediately approached Binance with a proposal to collaborate on a derivatives platform. Over time, several proposals were made, including a joint venture structure favorable to Binance.
Finally, at the end of 2019, Binance agreed to invest.
“Well…we invested just 20% of our stock in them at one point, and then we exited a year later…and then…we didn’t stay there that long,” CZ said.
This transaction includes a token swap involving BNB, $FTTBinance became a minority shareholder. CZ emphasized that:
- He remained a passive investor throughout the relationship
- The companies chose not to request financial statements because they operated competing futures businesses.
“Due to the competitive nature of the business…I never…ask them for their financial statements…I’m a very passive investor. So when I invest, I don’t get involved in their business,” he said.
Binance-FTX Beneath the Surface Tension
Despite early cooperation, relations quickly deteriorated, CZ said. He reportedly began hearing reports that SBF was criticizing Binance in policy and regulatory circles in Washington.
“And then almost immediately after we made that deal, we kept hearing from our friends… that SBF was talking bad about us in Washington circles,” CZ said.
He also complained about FTX’s hiring practices, claiming that it offered dramatically higher salaries to Binance’s staff. FTX reportedly then used these employers to make competing offers to Binance’s VIP customers.
CZ said he has tried to remain cooperative in public and even agreed to joint appearances at industry events, but hinted that behind-the-scenes tensions were already brewing.
Reasons why Binance withdrew
By early 2021, FTX had raised funding that valued it at a reported $32 billion. CZ said that while Binance has a contractual right of veto over future funding rounds, it has chosen not to exercise it.
“So…we said…why don’t we actually just get out?” CZ recalled, explaining that Binance wanted to be free to compete rather than remain a shareholder in a fast-growing rival.
The withdrawal was finalized in July 2021, about a year and a half before FTX went bankrupt in November 2022.
“This is the same kind of problem they had…we didn’t know at the time,” he said while denying claims that Binance backed out due to inside information. “That’s absolutely not true.”
FTX collapse and its aftermath
FTX ultimately collapsed after it was discovered that customer funds had been misused to cover Alameda Research’s losses, triggering a liquidity crisis and bankruptcy.
Binance decides to liquidate in November 2022 $FTT Stock holdings accelerated the run. However, subsequent investigations and court proceedings concluded that internal fraud and mismanagement were the central causes of the bankruptcy.
CZ declined to comment extensively on the ongoing legal dispute, including efforts by the FTX Bankruptcy Foundation to recover funds from its 2021 withdrawal. However, he reiterated that Binance has no knowledge of FTX’s internal finances while it is a shareholder.
In summary, CZ’s explanation depicts the relationship between Binance and FTX as gradually thawing rather than a sudden collapse. If his remarks are any guide, the relationship was marked by early cooperation, growing conflict, and a strategic exit long before the crisis that reshaped the crypto industry.
SBF did not immediately respond to BeInCrypto’s request for comment on CZ’s claims.
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