On Friday, Sam Bankman-Fried said in his testimony that he had intended to sell his FTX crypto exchange in its infancy to Binance.
He told the court that in 2019 when he was working with co-founder Gary Wang to construct the exchange in Hong Kong, he had already intended it to specialize in margin trading, thereby offering customers the chance to make outsized bets.
The testimony
According to his court testimony, Bankman-Fried said that he had believed that the now-bankrupt exchange could become a platform catering specifically to margin traders.
Back then, this particular specialty had mostly been unaddressed on the exchange landscape. Therefore, he had thought that a crypto exchange like Binance could be interested in acquiring FTX.
Currently, Binance is considered the world’s largest crypto exchange, as data from CoinGecko shows that its trading volume stood at $4.6 billion a day earlier.
Binance had shown an interest in buying the FTX exchange while it collapsed last year in November, but had backed out of the acquisition.
Changpeng Zhao, the CEO of Binance, had said at the time that the issues FTX was facing were out of their control and they could not help.
The exchange
Bankman-Fried said that in the early days of the FTX exchange, getting customers had been quite the challenge, but word of mouth had helped turn it into a viable business.
He revealed that in 2019, the crypto exchange had managed to generate revenue of as much as $20 million. He added that by 2021, FTX had been generating about $3 million in revenue on a daily basis.
He also recalled that the crypto exchange’s risk engine was one of its early selling points. As compared to other exchanges, FTX’s risk engine took customer accounts into consideration.
The responsibility of the risk engine is to decide when the positions of the traders should be liquidated. The former CEO asserted that he had not written or read the code of the exchange when it was built.
Instead, he stated that it was his co-founder Wang who had built it line-by-line, while he himself had shared his philosophical perspective about what it should look like.
The details
The disgraced crypto mogul went on to say that another main appeal of the FTX crypto exchange was cross-margin trading.
Essentially, he said that this feature had allowed traders to take advantage of excess margin on one trade to fulfill the margin requirements associated with another.
However, it should be noted that Binance had never attempted to acquire FTX early on. Bankman-Fried stated that Binance’s internal team had been used, but only for developing their platform.
Mark Cohen, the lead lawyer, asked Bankman-Fried to shed some light on FTT, the failed token of the FTX exchange.
In response, Bankman-Fried said that the BNB token of Binance had inspired him. He also pointed out that FTX’s first investor was Binance.
The crypto exchange had given seed money in BNB to FTX worth $80 million. It was a steep decline in the value of the FTT token that triggered the collapse of the FTX crypto exchange last year.