CZ Rejects SBF’s $40M Offer to Create Futures Exchange
Binance CEO Changpeng “CZ” Zhao turned down a $40 million offer from former FTX CEO Sam Bankman-Fried in March 2019 to create a cryptocurrency futures exchange, as revealed in Michael Lewis’ book “Going Infinite.”
This proposal was a departure from Binance’s existing model, which focused on spot cryptocurrency trading. After careful consideration, Zhao opted to develop an in-house futures exchange.
Bankman-Fried later went on to establish the now-famous FTX exchange in May 2019, which faced financial difficulties and bankruptcy by November 2022. His ongoing criminal trial in New York is connected to these events.
Zhao’s decision left Bankman-Fried disappointed, as he considered it a missed opportunity. Bankman-Fried had viewed the creation of a crypto exchange as a lucrative endeavor but struggled to get started due to his lack of recognition in the crypto space.
Previously, Bankman-Fried had attempted to launch a bitcoin exchange called CryptonBTC in 2018 but faced challenges in promoting it and attracting users.
To realize his vision, Bankman-Fried began pitching the idea of creating a futures platform for existing crypto exchanges, with Alameda Research providing the technology and exchanges supplying the customer base. He believed that Changpeng Zhao, the CEO of Binance, was the most likely buyer.
Zhao was cautious about the proposal, as rapid losses in futures trading could lead to collateral depletion. However, Bankman-Fried’s design aimed to monitor trades closely and liquidate positions at the earliest sign of trouble.
Bankman-Fried had interacted with Zhao in the past, including sponsoring a Binance conference in early 2019, which provided some legitimacy to FTX in the crypto community.
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Creation of the FTT Token
Determined to bring his vision to life, Bankman-Fried introduced the FTX token (FTT), promising indirect revenue sharing with holders. FTX minted 350 million FTT tokens for international investors in May 2019, initially offering them at various prices. Most FTX employees, including Zhao, declined the offer, but external interest later drove up the token’s value.
Before the public listing of FTT, Bankman-Fried met Zhao at a crypto conference in Taipei, where their interaction appeared more cordial. Zhao subsequently expressed interest in buying a 20% stake in FTX for $80 million.
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