Unlike some other crypto companies that have imploded this year, FTX was almost mainstream. Mr. Bankman-Fried ran a commercial during the Super Bowl and bought the naming rights to the Miami Heat’s basketball arena. He was profiled in virtually every major news outlet, including The New York Times, and had nearly a million followers on Twitter.

“It’s like if the person you thought was Hermione turned out to be Voldemort,” the crypto journalist Laura Shin tweeted on Wednesday.

As the company collapsed, FTX’s venture investors were in the dark about Mr. Bankman-Fried’s plans, and employees had little guidance. Other companies scrambled to distance themselves. “There can’t be a ‘run on the bank’ at Coinbase,” Alesia Haas, the U.S. crypto exchange’s chief financial officer, wrote in a blog post. “We hold customer assets 1:1.”

In a note to Binance employees that was posted on Twitter, Mr. Zhao said that FTX’s demise “is not good for anyone in the industry.”

“Regulators will scrutinize exchanges even more,” he wrote. “Licenses around the globe will be harder to get.”

Until this week, Mr. Bankman-Fried, known by his initials SBF, was widely regarded as one of the industry’s most astute and formidable leaders.

In 2017, he founded Alameda Research, a crypto trading firm, that made a fortune exploiting arbitrage opportunities in the Bitcoin market. He parlayed that success into the creation of FTX, which was based in Hong Kong before relocating to the Bahamas last year.

He also embarked on a marketing blitz. In April, Mr. Bankman-Fried hosted a dazzling conference in the Bahamas, where he appeared onstage with former President Bill Clinton and former British Prime Minister Tony Blair. At one point, he was worth an estimated $24 billion, according to Forbes, making him the second-richest crypto businessman behind Mr. Zhao. Mr. Bankman-Fried vowed to one day give his entire fortune away.

When the crypto market crashed in May, Mr. Bankman-Fried was hailed as a savior. He lent the troubled crypto company Voyager Digital $485 million and bailed out BlockFi, a crypto lending firm, with a $400 million credit line.

But in recent weeks, he started to face blowback in the industry. He was criticized by crypto enthusiasts for supporting regulatory proposals that they viewed as an affront to the philosophical principles of the technology.

Then last week, the crypto publication CoinDesk reported on a leaked balance sheet showing that a large portion of Alameda’s assets consisted of FTT, a token that FTX had invented to ease trading on its platform. The news stoked fears that a plunge in FTT’s value could cripple both FTX and Alameda, which are closely entangled.

A former FTX investor, Mr. Zhao still held a large quantity of FTT, which Mr. Bankman-Fried had given to him to buy back equity in FTX. Mr. Zhao also seemed to be growing disgruntled with his colleague. In October, Mr. Bankman-Fried had made a joke on Twitter suggesting that Mr. Zhao was not allowed to enter Washington, an apparent reference to the scrutiny Binance has faced from U.S. regulators.

Over the weekend, Mr. Zhao announced on Twitter that Binance would sell its holdings of FTT. He insisted that he was not engaging in a “move against a competitor.” But he later compared the FTT token to Luna, a cryptocurrency that crashed in May, setting off a broader crisis.

The impact was immediate. Over three days, customers withdrew more than $6 billion from FTX. Mr. Bankman-Fried said on Twitter that “a competitor is going after us with false rumors.”

Around the same time, Mr. Bankman-Fried was calling possible investors as he tried to raise money, according to two people familiar with the conversations. But it was not clear how much he would need, one person said. The stakes were clearly high, though: Mr. Bankman-Fried explained that FTX was in an emergency situation, according to the other person.

On Tuesday, Mr. Bankman-Fried struck the agreement with Mr. Zhao. “Binance has shown time and again that they are committed to a more decentralized global economy,” he wrote. “We are in the best of hands.”

This content was originally published here.

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