There is a fascinating revelation for the Binance CEO in Michael Lewis’ book “Going Infinite”. It sheds light on an important moment in cryptocurrency history. In March 2019, Binance CEO Changpeng Zhao rejected the intriguing proposal that could reshape the crypto exchange landscape. Former FTX CEO Sam Bankman-Fried pitched CZ a $40 million deal that would spawn a crypto futures exchange. However, CZ chose to follow a different path.
Future focused offer
Bankman-Fried’s proposal was a bold departure from Binance’s current model. At that time, Binance operated primarily as a spot crypto exchange. The visionary entrepreneur proposed creating an exchange solely for Futures trading, a concept that sparked the imagination of many. After careful consideration, CZ turned down the $40 million offer. So he opted to develop an in-house futures exchange.
Unimpressed by CZ’s decision, Bankman-Fried later went on to found FTX, an infamous crypto exchange. FTX made its debut in May 2019. But it ultimately faced bankruptcy in November 2022. On the other hand, it has become the focal point of Bankman-Fried’s ongoing legal battle.
Binance CEO CZ’s decision: An “ordinary” choice
In Michael Lewis’s book, Bankman-Fried’s perspective on CZ’s selection is described as “banal and vaguely disappointing”. Bankman-Fried’s comment on CZ: “Kind of a boor, but no worse than a boor.” In the cryptocurrency world, Binance CEO CZ’s decision to seize the opportunity left a lasting impact.
Unlike traditional spot exchanges, futures exchanges allow investors to trade crypto with only a portion of their collateral. Binance CEO CZ’s reluctance to accept Bankman-Fried’s offer was likely influenced by the potential risks associated with futures trading.
Journey to FTX
Bankman-Fried had long considered the idea of creating a crypto exchange, realizing its potential as a “money machine.” However, he faced the challenge of entering a field where he was an unknown figure. Its first attempt in 2018, the launch of CryptonBTC, received little attention. It also pushed him to look for a new approach.
Bankman-Fried and his team decided to pitch the idea of a futures platform to established crypto exchanges. Alameda Research provided the technology. Additionally, it would add to the customer base of existing exchanges. Among potential buyers, CZ’s Binance exchange emerged as the most promising candidate.
Concerns of Binance CEO CZ
CZ approached the offer cautiously due to the risks involved. A rapid decline in futures could lead to collateral losses for the stock market. However, Bankman-Fried’s design included real-time transaction tracking and instant liquidation of positions in case of losses, allaying CZ’s concerns.
The relationship between Bankman-Fried and CZ dates back to 2018. It started to take shape when CZ attended a Binance conference sponsored by Bankman-Fried. Despite this encounter, Bankman-Fried did not form a strong impression of CZ. But later, as decisions were made, the true nature of their relationship was revealed.
The journey of FTT token and FTX
Bankman-Fried was determined to bring his vision of a user-friendly crypto futures exchange to life. Bankman-Fried hired crypto experts like Ryan Salame and Zane Tackett to handle tasks he didn’t know how to do, like marketing. But he also needed money to run this business. That’s why Bankman-Fried introduced the FTX token (FTT), a digital asset that indirectly promises holders a share of FTX’s annual revenues through a token buyback and burn mechanism. A move that theoretically increases the value of the remaining tokens. Accordingly, this move was a tactic successfully implemented by the Binance exchange.
Despite regulatory challenges in the US, FTX minted 350 million FTT tokens in May 2019, targeting international investors. Lewis says some tokens were sold to FTX employees for five cents. He also noted that it was offered to “important crypto people like Zhao” for ten cents. Lewis said Zhao turned down the offer, as did most FTX employees except Salame. But there was outside interest in 20 to 70 cents, a figure that Bankman-Fried later regretted because it was too cheap, according to Lewis. Lewis sums up the situation when it listed on FTX and went public in July. Accordingly, it says that FTT opened at $1 and traded up to $1.50. Just before listing, Bankman-Fried ran into Zhao at a crypto conference in Taipei. He experienced a warm embrace. “For the first time, CZ seemed to be more interested in me than I was interested in him,” Bankman-Fried said. Three weeks later, Zhao called Bankman-Fried. He offered to buy 20% of FTX’s shares for $80 million. However, when we look at it as cryptokoin.com, this has not happened.
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