FTX’s acquisition of Bithumb seen killed by liquidity crisis

FTX’s plan to buy South Korean crypto exchange Bithumb appears to have gone up in smoke, with billionaire Sam Bankman-Fried’s empire being rocked by a liquidity crisis, industry watchers said Thursday.

Crypto exchange giant Binance’s announcement on Wednesday to back out of its plans to acquire FTX is likely to halt the ongoing deal between the Bahamian crypto exchange platform and Bithumb, according to experts.

“Investors have been wary of the crypto market because of increased volatility caused by the US Federal Reserve’s aggressive rate hikes and the current liquidity crisis,” Lee Tai-ki, a researcher at the Korea Institute of Finance, told The Korea Herald.

“For the moment, FTX is dealing with a serious liquidity crisis -- which would have been saved by Binance’s acquisition -- so the platform is now unable to buy Bithumb,” he added.

A Bithumb spokesperson declined to comment.

Vident, a Kosdaq-listed broadcast monitor maker and the largest shareholder of Bithumb, said in a regulatory filing in July that FTX had approached them to "negotiate Bithumb Holdings' and Bithumb Korea's selling of equity securities," indicating they were discussing an acquisition deal. It added that it was reviewing all options tied to the matter including "co-management."

Vident saw its share price plummet 7.15 percent from the previous session to close at 4,155 won ($3) on Thursday. The price has more than halved since July, when the first reports of FTX’s acquisition of Bithumb buoyed Vident’s price to 11,900 won on July 25. The company owns 10.23 percent of Bithumb Korea and 34.22 percent of Bithumb Holdings, the holding company of Bithumb Korea.

Bankman-Fried, co-founder of FTX, reportedly told investors ahead of Binance’s announcement that his company is struggling with a shortfall amounting to $8 billion from an apparent panic-induced “bank run” according to the Wall Street Journal. He has asked investors for emergency funding.

Binance tweeted on Wednesday, “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.”

Cryptocurrencies have plummeted amid the deal's turmoil, with bitcoin on Thursday morning trading below $16,000 for the first time since November 2020.

(mkjung@heraldcorp.com)