Michael Lewis reveals how Binance's 'c trap' was behind the demise of FTX

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Michael Lewis reveals how Binance's 'c trap' was behind the demise of FTX

In November of 2022, Sam Bankman-Fried's FTX was teetering on the brink. The final collapse came at the hands of Changpeng Zhao-'CZ' to everyone in the industry, who Twittered that his company Binance was dumping its entire position in FTX's house token, FTT. The fire sale, along with Bankman-Fried's ham-fisted attempt to protect the token, caused a panic and FTX was bankrupt days later.

This storyline is a familiar sight for anyone who has been following the harrowing ups and downs of the crypto industry in recent years. Michael Lewis's new book, Going Infinite, reveals fresh details about the bitter rivalry between the two cryptocurrency kingpins, including how Zhao laid a trap for Bankman-Fried more than a year earlier that would let him deliver the coup-de-grace last fall.

Before describing the trap, it's worth noting some of the gossipy details that Lewis unearthed about relations between the two men. This includes a revelation that Bankman-Fried, seeking to convey legitimacy on FTX, paid Binance $150,000 to appear on stage at a 2019 conference hosted by the company in Singapore-he 'effectively paid CZ to be his friend' in Lewis's words. He would later buy 20% of FTX for $80 million, but only after rejecting an earlier overture to invest, leading Bankman-Fried to complain to the author: He's kind of a douche, but not worse than a douche. The founder of FTX also would complain that the Canadian-raised transnational Zhao had behaved'very Chinese'during another spat.

The most interesting part of the deal, however, is the currency in which Zhao requested payment, mostly cash and Bitcoin, but also $500 million in FTT tokens and, crucially, $400 million worth of a token called BNB held by FTX. Binance's own native currency, the token that Zhao bought in the first place, is Binance's own currency.

In the course of the transaction, Zhao had acquired a hoard of FTT that he would later use to sink FTX, while also requiring his rival to hand over BNB that Bankman-Fried could have used as ammunition to dump in an attack on Binance.

Binance declined a request to comment on Lewis's finding, and it is possible, though unlikely, that there was no strategic motive for Zhao to include FTT and BNB in the buy-out transaction. The best guess is that when it came to corporate skullduggery, the master gamer Bankman-Fried was playing checkers and Zhao was playing chess.

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