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In a bizarre echo of what happened in the early summer of 2022, when now-defunct cryptocurrency exchange FTX offered to bail out rival Voyager Digital as the collapse of the Terra stablecoin (TerraUSD) rocked the crypto world, Binance now appears to have donned the mantle of the proverbial knight of the cryptocurrency market. The shining shield of Voyager clients, leading some to speculate whether Binance will eventually decline in a similar fashion to that of FTX.
As some of our readers still remember, the Terra algorithmic stablecoin collapsed a few months ago as the internal price stabilization mechanism, which relied on burning or minting TerraUSD or LUNA depending on the nature of the price misallocation, failed to keep up. With the speed coming to sell orders. In fact, US federal prosecutors are currently examining whether FTX’s Alameda Research and Sam Bankman-Fried had any role in precipitating Terra’s collapse by contributing to the initial spike in sell orders. The collapse of TerraUSD triggered a chain reaction that sent the hedge fund Three Arrows Capital (3AC) crashing. Since 3AC borrowed $665 million from Voyager Digital, the exchange has been hit by a severe financial crisis when the hedge fund reneged on its commitments. Voyager eventually declared bankruptcy, and FTX was able to purchase the company in September at an auction for $1.4 billion.
Of course, with FTX itself now bankrupt, some continue to speculate that Sam Bankman-Fried (SBF) may have had an ulterior motive when he embarked on a crypto rescue mission in early summer. After all, almost all of the entities rescued by FTX have large holdings of the FTT token – FTX’s native currency. Of course, this token played a significant role in the collapse of FTX a few weeks ago when it became known that Alameda Research had borrowed billions of dollars of FTX clients’ funds by deploying illiquid collateral in the form of FTT and other coins, which prompted Binance to start dumping its stash of FTT. own and accelerate the bank’s operation on the SBF’s own cryptocurrency exchange.
This brings us to today, when Binance has now signed a $1.022 billion deal to acquire Voyager assets. The transaction values these assets at $1.002 billion and includes consideration of an additional $20 million. This deal is expected to close in April 2023, and Binance has agreed to offer $10 million initially as a “good faith deposit.”
So, how does Binance’s deal with Voyage spark a sense of déjà vu? Well, Binance is embroiled in an audit-related controversy at the moment. For starters, the cryptocurrency exchange has tasked Mazars with conducting an “audit” of its reserves. However, the auditor’s press release noted the limited nature of its involvement with Binance, which precluded the process of obtaining any actual “evidence” that would have allowed the auditor to form an opinion. To a large extent, Binance’s Proof of Reserves certificate has been hidden around the exchange’s liabilities. This controversy then prompted Mazars to drop any dealings with crypto entities, citing the potential for “misuse” of such associations. This has predictably shaken the trust placed in Binance and other exchanges.
Of course, there are no indications at this time that Voyager Digital secretly holds a large stash of the BNB token – Binance’s native currency. Moreover, even with the scrutiny controversy, most pundits concede that Binance appears capable to all intents and purposes. Thus, the exchange’s bailout of Voyager customers at this point may not suffer the same ignominious fate that the earlier FTX effort precipitated thereafter.