Inside the ruthless moves Binance's CEO made to bring Sam Bankman-Fried's FTX to its knees

• Binance CEO Changpeng "CZ" Zhao agreed to buy Sam Bankman-Fried's FTX in a dramatic climax of the rivalry between the two billionaires.
• While some have talked about the rescue in terms of a bailout, it comes only after CZ weakened confidence in FTX's financial position.

Up until Tuesday, two billionaires were vying to be the undisputed kingpin of crypto.

There was 30-year-old Sam Bankman-Fried, a hedge-fund trader turned CEO of an empire that included crypto exchange FTX and trading firm Alameda Research. Earlier this year, SBF emerged as a savior for floundering digital asset projects like BlockFi, Voyager Digital, and Celsius, with some calling him crypto's own central banker.

Alongside Bankman-Fried at the top stood Changpeng "CZ" Zhao, the CEO of Binance, the world's biggest crypto exchange. Binance invested in FTX in 2019, when the latter was still a derivatives exchange.

The two billionaires and their respective companies contrasted in several ways, and over time a rivalry emerged. SBF, for his part, advocated for heightened regulation in a sector that branded itself as decentralized, whereas CZ's firm faced routine regulatory probes from officials and seemed to avoid developing a physical presence in any territory where it would draw the eye of regulators.

Twitter feuds between the two over frontrunning trades and government oversight ensued for months.

Then, last year, SBF repurchased Binance's stake in FTX, giving the company FTX's tokens, called FTT, as well as Binance USD stablecoin.

But with Tuesday's news of Binance agreeing to buy FTX, the rivalry unequivocally tilted in favor of CZ — but that was no accident. Through a series of public manuevers, CZ ensured that he came out with the upper hand.

A suspect balance sheet

Over the last several days, those FTT tokens became the lever for CZ to use to spark fears in FTX's financial standing. On Sunday, he tweeted out that Binance would liquidate all of its FTT holdings due to "recent revelations."

—CZ Binance (@cz_binance) November 6, 2022

While those details remain unspecified, a bombshell November 2 CoinDesk report revealed a balance sheet for Alameda Research that showed unusual ties with SBF's exhange, FTX. One revelation, for example, was that most of Alameda's money seemed to be in the form of FTT, the digital token invented by its sister company and helmed by the same figurehead, SBF.

The report raised serious questions about Alameda's solvency, and CZ piled on — publicly via Twitter.

A collapse of confidence

In a tweet Sunday, CZ had referenced the collapse of the token LUNA earlier this year, saying that Binance exiting its position in FTT was a risk management move. With a few words, he tanked confidence in SBF's crypto empire.

—CZ Binance (@cz_binance) November 6, 2022

On Monday, SBF tried to squash fears in a now-deleted tweet, apparently targeting CZ: "a competitor is trying to go after us with false rumors."

"FTX is fine," he said."Assets are fine."

But investor confidence in FTX and its liquidity had already dried up. FTX was facing a "significant liquidity crunch," as CZ would later describe it, and the market reacted to those comments with a bank run.

According to a Reuters report citing a message Bankman-Fried sent to staff, users withdrew about $6 billion from FTX in the 72 hours leading up to Tuesday. Just some weeks ago, FTX was valued at $32 billion.

SBF lost 94% of his wealth virtually overnight, marking the biggest one-day wealth collapse among billionaires on record, according to Bloomberg.

By midday, CZ and SBF had announced they'd agreed to a deal for Binance to takeover FTX.

"I know that there have been rumors in media of conflict between our two exchanges, however Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators," SBF tweeted. "We are in the best of hands."

—SBF (@SBF_FTX) November 8, 2022

And as if to remind the internet who came out on top, CZ on Wednesday took to Twitter once more to warn against doing exactly what FTX had done: "Never use a token you created as collateral."

—CZ Binance (@cz_binance) November 8, 2022

Meanwhile, in a note to employees seen by the Financial Times, CZ said the bailout, which cemented Binance as the world's largest crypto exchange, was not "a win."

He also noted, in capital letters, that no one should be trading FTX's FTT tokens.

"We still have many challenges ahead of us, let's continue to push ahead and help increase the freedom of money all around the world, steadily and consistently," CZ concluded.

But, of course there is always more palace intrigue. In a final twist in the rivalry between the two crypto luminaries, FTX may still fail after all the back and forth. On Wednesday, Coindesk reported that Binance was reconsidering its takeover after due diligence of Bankman-Fried's failed exchange. Stay tuned.