Michael Lewis’s recently published book, “Going Infinite,” unveils an intriguing episode from the cryptocurrency world involving Binance CEO Changpeng “CZ” Zhao and former FTX CEO Sam “SBF” Bankman-Fried back in March 2019.
According to the book, SBF approached CZ with a proposal to create a futures crypto exchange designed to minimize risk associated with high-leverage trading. The traditional futures exchanges required traders to provide small collaterals and would demand additional collateral if a trade started to go south. However, in the volatile crypto market, rapid and substantial price swings could lead to exchanges facing significant losses due to insufficient collateral. SBF’s idea was to establish a futures exchange that could closely monitor traders’ activities and automatically liquidate their positions if they exceeded their collateral, thus limiting potential losses for the exchange.
At the time, Binance and FTX had different strategic objectives. FTX aimed to cater to institutional investors, while Binance primarily focused on retail customers. After deliberating SBF’s proposal for several weeks, CZ reportedly turned down the request for a $40 million investment in SBF’s project and instead decided to develop an in-house futures platform at Binance.
According to the book, SBF was not pleased with CZ’s decision and referred to the Binance CEO as a “douche” due to the rejection. Subsequently, FTX went on to launch its own FTX futures exchange in 2019, although there were uncertainties about its potential success. SBF is quoted in the book as saying:
“If it works it is worth billions of dollars, but I thought there was a better than fifty per cent chance it wouldn’t work. I’d never done marketing. I’d never talked to the media. I’d never had customers. It was just different from anything that I’d ever done.”
This incident was not the only occasion when SBF and CZ’s paths crossed. In 2022, amid the FTX liquidity crisis, FTX sought acquisition talks with Binance again, but CZ declined, asserting that the platform was beyond redemption.
These revelations come to light as SBF faces trial in New York, where he is confronting multiple charges of fraud and money laundering related to the collapse of FTX. The book provides insight into the dynamics and competition within the cryptocurrency industry and the challenges faced by prominent figures in the field.
Related: Bankman-Fried Fraud Trial Begins, Opening Arguments Heard