Binance, the world's largest cryptocurrency exchange, has backed out of a bailout plan with its rival FTX. It stated that it would not pursue the purchase after conducting due diligence.
"As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com," a statement from the company posted on Twitter said.
"In the beginning, our hope was to be able to support FTX's customers to provide liquidity, but the issues are beyond our control or ability to help," the statement continued."
Concerns over FTX's financial condition reportedly spurred $6 billion in withdrawals in only three days.
According to Reuters, the US Securities and Exchange Commission (SEC) is looking into FTX's management of customer funds and its crypto-lending activities.
The markets regulator was looking into whether the platform had followed securities regulations by keeping customer assets separate and whether it had traded against customers.
FTX founder Sam Bankman-Fried and Binance CEO Changpeng "CZ" Zhao are two of the most prominent personalities in the crypto business, as well as high-profile rivals.
According to a notice on its website, "FTX is currently unable to process withdrawals. We strongly advise against depositing."
Zhao, who had tweeted on Sunday that Binance would liquidate its holdings of FTX's digital token, known as FTT, contributed to the pressure on FTX. Over the course of the following week, the token then lost almost 80% of its value.
On Tuesday, Binance intervened, announcing that it has signed a letter of intent to purchase FTX's non-U.S. division. But it also stated that it had "the discretion to pull out from the deal at any time"
A growing number of crypto firms have failed as a result of not having enough cash on hand. As worries about how crypto platforms are trading rise, the SEC and other regulators have been increasing their surveillance of the market, adding to the pressure.
Binance agreed to help out its struggling rival in the face of a liquidity crisis that was partially brought on by Binance's announcement that it would sell off all of its holdings of FTX's exchange token FTT. Binance's withdrawal of its offer put an end to a fast-paced day and a half.
Most of the assets on the balance sheet of FTX's sister company, trading firm Alameda Research, were in FTT.
Following the disclosure that Binance had withdrawn from its agreement to purchase FTX, FTT, which had already fallen precipitously in recent days, dropped another 32% to roughly $2.41.
