Is the Binance and FTX deal falling apart? Fallout for gaming and esports

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In less than a day, Binance could be reneging on its offer to acquire the assets of cryptocurrency exchange FTX.

According to a report by the Wall Street Journal, this is the result of Binance’s due diligence investigation into FTX. In particular, FTX’s relatively small workforce compared to Binance’s (400 employees vs. over 7,000, respectively) raised red flags. Binance was concerned about FTX’s ability to detect fraud.

Additionally, there were concerns about the financial entanglement between FTX and Alameda Research. Alameda is a trading company founded by FTX founder Sam Bankman-Fried, which also operates on the FTX platform.

The fate of the deal depended on Binance’s findings, which means the deal itself is likely in trouble.

While both companies have ties to gaming, FTX has bigger financial ties. FTX owns a game developer and has record sponsorships with TSM and the North American League of Legends Championship Series.

The exact terms of the contracts are not known. However, FTX-sponsored companies are likely reviewing their financial planning now that their contracts are in doubt.

Given the FTX situation, and the Celsius example above, it’s possible that the worst case scenario is the collapse of the exchange. In that situation, the sponsors would likely become creditors of FTX when it goes bankrupt. Similarly, FTX’s game development assets will likely be sold, albeit in a less favorable market than when they were acquired.

However, if FTX finds a way out of its liquidity crisis, the exchange could try to renegotiate these deals. Of course, this largely depends on the structure of the contract.

With the current (and potentially growing) volatility of cryptocurrencies, gaming and esports companies may want to take a page out of Binance’s book and be more thorough going forward.

Update at 2:22 PM PST: Binance confirmed they would not acquire FTX.

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