Binance CEO Changpeng Zhao declined to pay former FTX CEO Sam Bankman-Fried $40 million in March 2019 to create a crypto futures exchange.
Keep up with the latest news, trends, charts and views on crypto and DeFi with a new biweekly newsletter from The Block's Frank ChaparroBinance CEO Changpeng “CZ” Zhao declined to pay former FTX CEO Sam Bankman-Fried $40 million in March 2019 to create a crypto futures exchange, instead deciding to develop one in-house.
The idea of a futures-only exchange was a departure from Binance's model at the time, as it was still just a spot crypto exchange. After mulling it over, Zhao turned down Bankman-Fried's $40 million offer, choosing instead to develop a futures exchange in-house. Unlike traditional spot exchanges, futures exchanges allow traders to trade crypto using only a portion of their collateral.The idea of creating a crypto exchange had been weighing on Bankman-Fried’s mind as an “obvious opportunity” as a “money machine.” However, he didn’t know how to get started, engage with ordinary people and attract customers, Lewis wrote. He was unknown in the crypto space at the time.
Zhao was wary of what Bankman-Fried was proposing as if a futures trade went bad quickly, it could wipe out the collateral posted and leave the exchange on the hook for losses, Lewis noted. But Bankman-Fried’s proposed design would monitor trades by the second and liquidate positions as soon as they went into the red.
Despite regulatory challenges in the U.S., out of thin air, FTX minted 350 million FTT tokens aimed at international investors in May 2019. Some tokens were offered at five cents to FTX employees and ten cents to “important crypto people, like Zhao,” Lewis noted. Zhao turned this offer down too, as did most FTX employees, Lewis said — except Salame. But there was outside interest at 20 to 70 cents — a figure Bankman-Fried later regretted as being too cheap, according to Lewis.
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