According to an excerpt from Michael Lewis' book "Going Infinite: The Rise and Fall of the New Tycoons," Binance CEO Changpeng "CZ" Zhao turned down former FTX CEO Sam "SBF" Bankman-Fried in March 2019 when Bankman-Fried offered to sell his cryptocurrency futures exchange for $40 million.
The book describes how SBF proposed the creation of a "zero-risk" futures exchange to address issues related to high-leverage trading gone wrong. In traditional futures exchanges, traders can amplify their positions with relatively little collateral. However, if trades turn unfavorable, the exchange often requires traders to increase their collateral.
In the crypto world, where prices can be highly volatile, this can lead to exchanges incurring substantial losses due to insufficient collateral. FTX, on the other hand, aimed to establish a futures exchange that actively monitored trader activities and automatically liquidated positions when trades exceeded collateral, effectively limiting potential losses for the exchange.
The book reveals that in 2019, Binance and FTX had different strategic priorities. FTX was focusing on attracting institutional investors, while Binance was targeting retail clients. After deliberating the proposal for several weeks, CZ reportedly declined SBF's request for funding and instead decided to develop an in-house futures platform.
The book suggests that CZ's decision didn't sit well with SBF, who allegedly referred to the Binance CEO as a "jerk." Following Binance's rejection, FTX proceeded to create its own FTX Futures exchange in 2019, but its success remained uncertain. An excerpt from the book quoting SBF reads as follows: "It's worth billions of dollars if it works, but I think there's more than a 50 percent chance it won't work. I've never done marketing. I've never talked to the press. I've never had customers. It's different from anything I've done before."
This wasn't the only interaction between SBF and CZ. In 2022, when the FTX liquidity crisis became public, FTX once again approached Binance for a potential acquisition, but CZ declined, asserting that the platform was beyond recovery.
