Coke vs Pepsi. Mac vs PC. CZ vs SBF. At least, that’s how some frame it. However, the competition between these two is hardly a contest of equals.
The two CEOs helmed the two largest centralized exchanges in cryptocurrency, until this Winter left only one standing. These two men, Changpeng “CZ” Zhao and Sam “SBF” Bankman-Fried stand at the center of the one of the largest, most dramatic financial collapses in recent memory. But how did this feud begin between the Binance CEO and the former FTX CEO?
Part 1: CooperationÂ
Unbelievably, our story begins with peace and cooperation between the two parties. In the second quarter of 2019, SBF launched the cryptocurrency derivatives exchange, FTX. This new venture managed to raise $8M in its first seed funding rounds, but it wasn’t until Binance, under the leadership of CZ, announced its “Strategic Investment” with the company that things really took off for FTX.
As part of the strategic partnership, Binance and FTX planned to work together to develop the cryptocurrency ecosystem further. In addition to the equity investment into FTX, Binance had also taken a long-term position in the FTX Token (FTT) to help enable the sustainable growth of the FTX ecosystem.
We are pleased to have an excellent partner [FTX] joining the Binance ecosystem and aim to grow the crypto market together.
Changpeng “CZ” Zhao
Binance is a market leader which has strong synergy with derivatives platforms, and we appreciate their global industry leadership, consistent execution, and innovation.
Sam Bankman-Fried
In July 2021, FTX completed a $900M Series B financing, with FTX’s valuation rising from $100M to $18B after roughly two years since its establishment. CZ stated at that time that Binance had withdrawn entirely from FTX’s equity investment.Â
“The exit is part of the normal investment cycle, and it was done under good conditions. We are still friends”. CZ later revealed that Binance had walked away with roughly $2.1 billion equivalent in cash (BUSD and FTT).Â
The two had kind words for each other during this honeymoon period, with both unaware of the future repercussions of this seemingly innocuous announcement.Â
Although, there were hints that behind closed doors things were not so simple. SBF said of CZ at the time of the exit, “I think there are some differences between how we run our businesses.”
Part 2: Arms Race
The explosive growth of FTX turned it into more than just a derivatives platform and put it more directly in competition with the king of centralized exchanges, Binance. Although there was no direct conflict between the two platforms when Binance withdrew its equity investment from FTX, both exchanges realized they were each other’s biggest competitors. This led to a crypto services arms race between the two firms.Â
In the second quarter of 2019, FTX was already firmly established as a derivatives exchange. By the third quarter of 2019, Binance Futures was launched. In August 2019, FTX was the first to launch leveraged tokens, and Binance also launched leveraged tokens in the following months.
In April 2020, Binance announced the acquisition of the cryptocurrency data website CoinMarketCap for $400M. The following August, FTX announced the acquisition of the encrypted asset management tool Blockfolio for $150M. Binance would develop the BNB Chain, and FTX would heavily invest in the Solana ecosystem.Â
Part 3: Shots Fired
During Parts 1 and 2 of this saga, SBF had been endearing himself to American regulators and politicians. In late October 2022, in an apparent flex about his access to politicians and regulators, SBF tagged CZ and wrote, “Excited to see him repping the industry in DC going forward! uh, he is still allowed to go to DC, right?”. This jab implied that due to CZ’s Chinese nationality, he would not be allowed to visit D.C. SBF has since deleted the tweet.
In July of this year, the two traded words over FTX/Alameda’s bailout of Three Arrows Capital and Voyager.Â
These passive-aggressive Tweeting skirmishes would only foreshadow the events of November 2022. Â
Part 4: Self-Immolation
The rest is history. Rumors would begin to spread that FTX’s sister company, Alameda Research, which was heavily collateralized by FTX tokens. CZ then announced his intention to liquidate any remaining FTT it had on its books by selling them on the open market.
Former CEO for Alameda Research, Caroline Ellison, would counter with an over-the-counter trade offer at a price of $22 and inadvertently caused FTT holders to dump the token.
According to a report from Bloomberg, by publicly revealing her floor price for the assets she greatly accelerated the decline of FTX.
CZ initially offered to buyout FTX and possibly provide relief for the failing company. However, less than two days after the announcement, Binance withdrew its offer to acquire FTX, stating that “the issues are beyond our control or ability to help.”
For an extended timeline of FTX’s swift decline into bankruptcy and CZ’s role, check out our article here.
Part 5: Throwing In the Towel
SBF would concede to his alleged competitor the same day he would file FTX for Chapter 11 bankruptcy.Â
For his part, CZ adamantly denied that anyone “won”.
Part 6: Revelations
Following the collapse, CZ was often the target of blame. A role he denied entirely in his “false narratives” thread. Among other things, CZ would proclaim that he never viewed SBF as competition and FTX failed because they embezzled user funds.
CZ would question Kevin O’Leary’s role in the FTX scandal as a paid spokesperson in a thread on December 9th. CZ would reveal that he had become increasingly uncomfortable with FTX/Alameda, which led to Binance initiating its exit process from its FTX position a year and a half ago.Â
CZ alleged that SBF “launched a series of offensive tirades at multiple Binance team members” and threatened to go to “extraordinary lengths to make us pay.” Zhao would also suggest that Bankman-Fried had used his political network to attack Binance and others within the industry.
SBF would provide a rebuttal surrounding the buyout, with the former FTX CEO claiming that Binance “threatened to walk at the last minute” without an additional $75M, accusing CZ of lying about his role in the deal.
Part 7: Not A Fight
CZ fielded numerous questions regarding his company and FTX in a recent interview with CNBC.
CZ was asked about Sam Bankman-Fried’s comment that he regretted entering a battle with the Binance CEO as it led to the collapse of the FTX exchange. The Binance CEO replied:
We were never in a battle with him. He may think he is battling with us, but we didn’t even notice. We did hear some concerns about him badmouthing us behind our backs in DC and other political lobbying circles. We just said we don’t want to be entangled; we just want to exit our equity portion, and we did that a year and a half ago.
CZ concluded the discussion with the following;
We were never against them. We don’t focus on other smaller exchanges as focusing our energy there doesn’t give us the best return. If we take customers away from there, we will only grow by 1 or 0.1%. However, if we can grow the industry, we can grow our user base by 5x, 10x, or even 100x. Hence, we are focused on growing the crypto market alongside other exchanges.Â
Binance maintains its reputation as the leading crypto exchange and currently processes over $10 billion daily trading volume.Â
Part 8: The Dust Settles
In the aftermath of this conflict, only CZ remains. SBF has recently been arrested and will most likely be extradited to the U.S. to face charges. Meanwhile, CZ has doubled down on Binance’s commitment to transparency by leading the charge for exchanges to provide Proof of Reserves to its customers.
With these events behind us, we can see them with a fresher, perhaps more clear perspective. It truly seems that the collapse of FTX was entirely on Sam’s head. CZ simply made the wise decision to end a business relationship with a shady company. SBF used this in an attempt to deflect blame from his own mistakes to his rival. A rivalry which is now revealed to have been completely one sided from the start.
