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.
At the time, Binance was primarily a spot crypto exchange, and the idea of a futures-only platform was a deviation from its existing model.
After careful consideration, Zhao declined Bankman-Fried’s offer and instead chose to develop a futures exchange in-house, according to Michael Lewis’ book “Going Infinite,” which delves into the story of FTX’s spectacular collapse and the enigmatic founder at its center.
Bankman-Fried, undeterred by the rejection, went on to establish the notorious FTX exchange in May 2019.
According to Lewis’ book, Bankman-Fried perceived Zhao’s decision as “ordinary and vaguely disappointing.”
He described Zhao as “kind of a douche but not worse than a douche,” expressing his belief that Zhao had the potential to be an intriguing character but fell short of expectations.
Compared to traditional spot exchanges, futures exchanges allow traders to engage in cryptocurrency trading using only a portion of their collateral.
Bankman-Fried had been contemplating the idea of creating a crypto exchange, believing it to be an “obvious opportunity” and a potential “money machine.”
However, he faced challenges in getting started, attracting customers, and establishing connections in the crypto space, as he was relatively unknown at the time.
In a previous attempt in 2018, Bankman-Fried collaborated with Alameda Research friend Gary Wang to launch a Bitcoin exchange called CryptonBTC.
However, the platform failed to gain traction due to a lack of promotion and user participation.
Bankman-Fried and a small team subsequently began pitching existing crypto exchanges with the concept of a futures platform.
Their proposal involved Alameda providing the technology while established exchanges would supply the customer base.
Bankman-Fried believed that Zhao, the CEO of Binance, was the most likely buyer for their idea.
Zhao, however, had some considerations about Bankman-Fried’s proposition.
He was concerned that a futures trade gone wrong could result in significant losses for the exchange.
Bankman-Fried’s proposed design aimed to mitigate this risk by closely monitoring trades and swiftly liquidating positions if they turned negative.
Despite Zhao’s rejection, Bankman-Fried remained determined to bring his vision to life, pursuing his goal of creating a user-friendly crypto futures exchange catering to both retail and professional traders.
To secure funding for the project, Bankman-Fried introduced the FTX token (FTT), which promised holders a share of FTX’s annual revenues through a token buyback and burn mechanism.
FTX minted 350 million FTT tokens in May 2019, targeting international investors.
While Zhao declined the offer, FTT garnered interest from external parties and eventually listed on FTX, opening at $1 and reaching $1.50.
Just before the token was listed, Bankman-Fried encountered Zhao at a crypto conference in Taipei, where Zhao displayed a heightened interest in him.
Three weeks later, Zhao contacted Bankman-Fried with an offer to purchase a 20% stake in FTX for $80 million.
As reported, the jury selection process for the trial of Sam Bankman-Fried concluded on Wednesday morning, with a diverse group of individuals from various professional backgrounds chosen to serve.
The trial is expected to last approximately six weeks, during which the prosecution will present its case against Bankman-Fried.