Technology Binance and FTX deal falling apart? Fallout for...

Binance and FTX deal falling apart? Fallout for games and esports

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In less than a day, Binance could potentially decline its offer to acquire the assets of fellow cryptocurrency exchange FTX.

According to a report by the Wall Street Journal, this is the result of Binance’s due diligence investigation into FTX. In particular, FTX’s relatively small workforce compared to Binance’s (400 employees versus 7,000 plus, respectively) raised red flags. Binance was concerned about the FTX’s ability to detect fraud.

In addition, there were concerns about the financial entanglement between FTX and Alameda Research. Alameda is a trading company founded by FTX founder Sam Bankman-Fried who also trades on the FTX platform.

The fate of the deal depended on Binance’s findings, meaning the deal itself is likely in trouble.

While both companies have ties to gaming, FTX has larger financial ties. FTX owns a game developer and has record-breaking sponsorships with TSM and the North American League of Legends Championship Series.

The exact terms of the contracts are unknown. However, companies sponsored by FTX are likely to be overhauling their financial planning now that their contracts are at stake.

Given the situation of FTX — and the previous example of Celsius — it is possible that the collapse of the stock market is in the worst case. In that situation, sponsors would likely become creditors to FTX when it files for bankruptcy. Likewise, FTX’s game development assets are likely to be sold, albeit in a less favorable market than when they were acquired.

However, if FTX finds a way out of the liquidity crisis, the exchange may try to renegotiate these deals. This is of course largely dependent on the contract structure.

With the current (and potentially growing) cryptocurrency volatility, gaming and esports companies can take a page out of Binance’s book and be more thorough in the future.

Update 2:22 PM PT: Binance confirmed they wouldn’t buy FTX.

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Shreya Christinahttps://ukbusinessupdates.com
Shreya has been with ukbusinessupdates.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider ukbusinessupdates.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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