In an intriguing revelation from Michael Lewis’ book ‘Going Infinite’, it was revealed that Changpeng “CZ” Zhao, the CEO of Binance, declined a hefty $40 million investment offer from SBF, the ex-CEO of FTX, Sam Bankman-Fried. This offer was made in March 2019 with the intention of building a cryptocurrency futures exchange.
Turning Down SBF’s Offer
Binance, initially a spot crypto exchange, chose to develop a futures exchange internally rather than accepting Bankman-Fried’s proposal. This decision prompted SBF to launch FTX in May 2019. Unfortunately, FTX ran into financial troubles and filed for bankruptcy in November 2022, resulting in the ongoing trial of SBF.
Bankman-Fried’s Vision of a Crypto Futures Exchange
Bankman-Fried recognized the potential in creating a cryptocurrency exchange, but was unsure about the steps necessary to kickstart the process, such as engaging with the public and attracting customers. In 2018, he launched CryptonBTC, a bitcoin exchange, without a clear strategy for promotion or customer acquisition. Along with his team, he proposed developing a futures platform for existing crypto exchanges. In this setup, Alameda would supply the technology, and the existing exchanges would bring in the customers.
CZ, however, had concerns about this proposed model, as a single unfavorable trade could result in a total loss of collateral, making the exchange liable for the losses. Bankman-Fried’s alternative design, which included constant trade monitoring and immediate liquidation of positions in case of losses, was more appealing.
The Emergence of the FTT Token
Bankman-Fried believed his product could outperform existing ones and was willing to risk billions on the venture, even if it meant potential failure. He enlisted crypto experts Ryan Salame and Zane Tackett to handle marketing. To secure funding for the project, Bankman-Fried introduced the FTX token (FTT). This digital asset gave holders a share of FTX’s annual revenues through a buyback and burn mechanism, a strategy previously employed successfully by Binance.
In May 2019, despite regulatory challenges in the U.S., FTX generated 350 million FTT tokens for international investors. Some were offered to FTX employees at five cents and to key figures in the crypto industry, including CZ, at ten cents. Most FTX employees and CZ declined this offer, except for Salame. However, there was external interest in the tokens at prices ranging from 20 to 70 cents.
Bankman-Fried later regretted this valuation, considering it too low. When FTT was eventually listed on FTX and made available to the public in July, it opened at $1 and traded up to $1.50.
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