Crypto exchange FTX was valued in the billions. Now Binance plans to acquire it in a fire sale.

Sam Bankman-Fried, founder of the cryptocurrency exchange FTX, has become known as crypto's bailout king. Whenever a crypto company would fail, Bankman-Fried, who's also known as SBF, would swoop in with the cash to keep them afloat.

Now, SBF is seemingly getting a bailout of his own.

On Tuesday, the world's largest cryptocurrency exchange Binance announced it had signed a non-binding agreement to acquire FTX amid reports questioning the liquidity of SBF's crypto exchange and his trading group, Alameda. 

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The acquisition is dependent on the results of a due diligence investigation, according to Binance founder Changpeng Zhao, who also goes by CZ. And it should be noted that the tentatively planned takeover is only for FTX.com's operations, which account for the exchange's non-U.S. operations. Bankman-Fried runs a separate U.S. crypto exchange known as FTX.US. 

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SBF and CZ traded barbs on Twitter over the weekend, as CZ announced Binance would liquidate any holdings of FTT, FTX's own cryptocurrency token, due to "recent revelations." This essentially set off a chain of events that saw FTT token crash in value and FTX experience $6 billion in user withdrawals over a period of 72 hours.

Those revelations mentioned by CZ were mainly the result of reporting from CoinDesk reporter Ian Allison and an anonymous crypto journalist who pens the newsletter Dirty Bubble Media under the name Mike Burgersberg. Both reports had access to Alameda's balance sheets where there were clear liquidity problems, with the bulk of its assets in FTX's own FTT token. The findings saw Burgersberg flat out question whether SBF's empire was actually insolvent. 

The anonymous Burgersberg has gained notoriety in crypto circles over the past year as being one of the first to sound the alarm about crypto lending firms Celsius and Voyager well before both companies went bankrupt. And apparently, based on CZ's own Twitter likes, the Binance founder saw Burgersberg's report before making his decision to cash out of FTT too.

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According to reports, FTX was in talks to raise $1 billion at a valuation of $32 billion just six weeks ago. The crypto exchange raised $400 million at an $8 billion valuation in January. Now, it's being sold to its biggest competitor in a fire sale.

As has become the norm in crypto, the news has created a domino effect throughout the industry; Bitcoin dropped below $17,500, its lowest value since 2020.

It's hard to tell this story without mentioning that this is taking place on election day in the U.S. SBF became a major donor to the Democratic Party in attempts to lobby for pro-crypto legislation. At one point, he pledged as much as $1 billion towards elections heading into 2024. And while SBF did spend as much as $40 million on mostly Democratic campaigns through his Protect Our Future PAC, that's well short of the aforementioned $1 billion.

After today's news, it seems plausible that Democrats shouldn't count on the rest of SBF's $1 billion coming in any time soon.