The history between Binance and FTX represents one of crypto’s most consequential rivalries, yet the full story has remained largely untold—until now. Changpeng Zhao’s detailed account of the Binance-FTX relationship reveals a narrative far more complex than the public collapse suggests. Rather than a sudden confrontation, CZ describes how early cooperation deteriorated into strategic competition, ultimately culminating in Binance’s deliberate exit from their partnership more than a year before FTX imploded in November 2022.
For those tracking the evolution of crypto’s institutional landscape, understanding this relationship matters. The decisions made during Binance and FTX’s partnership—and the reasons behind them—shaped regulatory conversations, competitive dynamics, and risk management practices across the industry. CZ’s firsthand account cuts through speculation and provides concrete details about timeline, structure, and motivations that have been debated since FTX’s spectacular collapse.
How Binance and FTX Started: Early Partnership and Initial Investment
The relationship between these two powerhouses began not with conflict, but with what appeared to be natural business synergy. CZ first encountered Sam Bankman-Fried in January 2019 at a Binance-organized conference in Singapore. At that time, Bankman-Fried was running Alameda Research, a quantitative trading firm that had become a major trading client on Binance’s platform. The initial meeting laid groundwork for what would eventually evolve into a formal investment.
According to CZ’s account, the Alameda team and emerging FTX leadership approached Binance with multiple collaboration proposals. These weren’t casual conversations—they represented serious attempts to structure a derivatives partnership that could have fundamentally altered both companies’ trajectories. Binance entertained several structural approaches, including joint venture models that would have given Binance considerable control. However, none of these initial proposals materialized immediately, and the conversation entered a holding pattern while both organizations continued scaling independently.
The Investment Structure and Token Swap
By late 2019, negotiations finally crystallized into a concrete investment agreement. Binance agreed to take a minority equity stake, acquiring approximately 20% of FTX. This wasn’t an outsized position—CZ emphasized that Binance remained a passive investor throughout the relationship. The deal included a token swap involving BNB and FTT, meaning both companies gained exposure to each other’s native tokens as part of the arrangement. From Binance’s perspective, this structured investment provided a window into FTX’s growth trajectory while maintaining strategic flexibility.
What’s particularly revealing about CZ’s description is his explicit decision not to request detailed financial statements from FTX despite holding equity. As he explained, the competitive nature of their businesses—both operating futures platforms—made it inappropriate for him to demand the kind of operational visibility that would typically accompany a 20% stake. This passive posture would later become significant when analyzing whether Binance had any early warning signs of FTX’s internal problems. Instead, CZ treated it purely as a financial investment, monitoring returns rather than operations.
Why Binance Stayed Passive: The Competitive Conflict
Understanding Binance’s passive stance requires recognizing the fundamental tension embedded in the relationship from the start. Both companies were building competing futures trading platforms—Binance Futures and FTX Derivatives respectively. This directly competitive dynamic created information asymmetries that CZ considered inappropriate to breach. Requesting detailed financial statements, management reports, or operational metrics would have created ethical complications for both parties.
This passivity wasn’t negligence—it was a deliberate choice reflecting CZ’s investment philosophy. By remaining hands-off, Binance avoided conflicts of interest and maintained distance from FTX’s operational decisions. It also meant, however, that Binance had no mechanism to detect or influence any risky practices developing inside FTX. This distinction became crucial later when analyzing whether early exits reflected inside knowledge versus strategic timing.
The Deterioration: Competition, Recruitment Wars, and Political Maneuvering
Despite the early cooperation and formal investment, the relationship quickly soured. What began as two complementary platforms operating somewhat independently became increasingly adversarial. CZ describes hearing reports—shared by friends and industry contacts—that Sam Bankman-Fried was actively criticizing Binance in Washington policy circles. These weren’t casual conversations; they represented coordinated efforts to shape regulatory narratives around Binance, a company already facing significant regulatory scrutiny.
More than regulatory positioning, CZ alleges FTX engaged in aggressive talent acquisition targeting Binance’s staff. According to his account, FTX would recruit Binance employees by offering dramatically higher compensation packages, then leverage these new hires to approach Binance’s institutional clients with competing product offerings. This practice—sometimes called “hiring leveraged poaching”—represents a particularly aggressive competitive tactic in the financial services industry.
The Washington Influence Campaign
CZ’s characterization of Bankman-Fried’s activities in regulatory circles deserves careful examination. He describes hearing consistent reports that SBF was badmouthing Binance among policymakers and regulators in Washington. Given that Binance itself faced intense regulatory pressure and investigations during this period, any coordinated effort to shape negative narratives around the exchange represented a meaningful competitive threat. For context, CZ had previously faced scrutiny regarding Binance’s regulatory compliance, making the political dynamics particularly significant.
This dynamic reveals something crucial about how FTX positioned itself relative to Binance. While Binance embodied decentralized ambitions and ran primarily in gray regulatory areas, FTX cultivated an image as the “safe” alternative—crypto for institutions. By positioning Binance as reckless or non-compliant, FTX could advance its own regulatory narrative simultaneously. The strategy proved remarkably effective, particularly among institutional investors and political figures who had never deeply questioned FTX’s own underlying practices.
Talent and Client Poaching Tactics
Beyond regulatory maneuvering, the talent acquisition practices CZ describes paint a picture of systematic competitive aggression. FTX allegedly targeted Binance’s most valuable employees—traders, engineers, product managers—and offered compensation packages that vastly exceeded Binance’s standard rates. For a newly flush exchange raising capital at increasingly stratospheric valuations, this proved an effective recruitment tool.
More damaging, according to CZ, was what happened after these hires joined FTX. Rather than simply integrating them into FTX’s operations, FTX allegedly deployed them specifically to approach Binance’s high-value institutional clients. These weren’t cold outreach efforts—they were leveraging existing relationships and institutional trust. A client who previously worked with a Binance employee would be more inclined to listen when that same person, now at FTX, suggested alternative products or custody solutions.
The Strategic Exit: Why Binance Pulled Out of FTX Before the Collapse
By 2020-2021, FTX had transitioned from startup to unicorn. The exchange was raising capital at increasingly astronomical valuations, with Series C funding rounds valuing the company at $32 billion and beyond. These weren’t modest increases—FTX was experiencing the kind of hyperbolic growth that typically attracts intense media attention and investor euphoria. For Binance, holding a 20% stake meant watching a minority position in a company growing at exponential rates.
Yet rather than hold and accumulate additional upside, Binance made a counterintuitive choice. CZ describes the decision as straightforward: why remain a minority shareholder in an increasingly competitive platform when Binance could exit the position and compete freely without conflicts of interest? Importantly, CZ notes that Binance held contractual veto rights over subsequent FTX funding rounds—the company could have blocked future capital raises, reined in FTX’s expansion, or demanded operational changes. It deliberately chose not to exercise these rights.
The Veto Rights Binance Never Used
The existence of veto rights is a critical detail that deserves emphasis. Standard equity agreements often include protective provisions allowing significant shareholders to block major corporate actions. If Binance truly suspected FTX of problems, it could have leveraged these veto rights to demand information, restrict activities, or shape governance. According to CZ, Binance never used them. The company preferred clean separation to incomplete control.
This decision reflects a particular investment philosophy. Rather than attempting to manage what was increasingly viewed as a competitive threat, Binance chose to let FTX succeed or fail on its own merits. This had practical advantages—it simplified governance, eliminated conflicts of interest, and freed Binance from any legal liability for FTX’s decisions. It also meant Binance had no method to stop FTX from taking risks that would ultimately prove catastrophic.
The July 2021 Exit and the Bankrupt FTX Timeline
Binance completed its exit in July 2021. The timing matters considerably. This was roughly 16 months before FTX’s public collapse in November 2022—long enough that betting on this timing seems implausible, but not so long that Binance couldn’t have maintained a position if confidence remained high. According to CZ, the exit reflected strategic preferences rather than prescience. He categorically rejected claims that Binance had inside knowledge of FTX’s problems, noting that any such knowledge would have made the veto rights obvious to exercise rather than ignore.
The exit also coincided with broader market conditions. Bitcoin and crypto assets were entering a significant bull run in mid-2021. FTX’s valuation was at an all-time high following recent funding rounds. From a financial perspective, exiting near these peaks made sense regardless of any concerns about FTX’s long-term viability. CZ’s framing suggests that the exit represented portfolio management and competitive clarity rather than crisis anticipation. Whether this is fully transparent remains subject to interpretation, particularly given that subsequent investigations would later reveal FTX was already engaged in serious fraud by July 2021, though this wouldn’t become public for 16 months.
The Collapse and Aftermath: What Really Caused FTX to Fail
The collapse of FTX in November 2022 shocked the crypto industry, despite mounting evidence that the exchange was engaged in systematic misuse of customer funds. The proximate trigger involved revelations that FTX had secretly been transferring customer deposits to Alameda Research—Bankman-Fried’s trading firm—which then deployed those funds into venture investments, real estate, and increasingly desperate market speculation. When news of this practice became public, customer panic ensued, triggering a classic bank-run scenario where deposit withdrawals vastly exceeded available funds.
Binance’s decision to liquidate its FTT holdings in November 2022 is often cited as the final domino that collapsed FTX, and there’s historical accuracy to that narrative. The liquidation put pressure on FTT prices and accelerated customer panic. However, subsequent legal analysis and bankruptcy proceedings have consistently concluded that FTX’s core problems predated the Binance liquidation by substantial margins. The fraud, the fund misappropriation, the undisclosed leverage—all of these were operational realities that made collapse inevitable regardless of near-term price movements. FTX’s failure represents one of crypto’s worst losses, with billions in customer funds ultimately unrecovered.
The Fraud Architecture Beneath FTX
What’s important to understand about FTX’s collapse is that it wasn’t the result of market volatility or regulatory action or competitive pressure. It was the direct result of systematic fraud. Sam Bankman-Fried and a small group of associates had engineered a system where FTX customer funds could be secretly transferred to Alameda Research, creating implicit guarantees for that trading firm’s losses while removing risk from FTX depositors’ balance sheets. This required falsifying accounting records, manipulating software at the exchange level, and maintaining elaborate deceptions with sophisticated investors, lenders, and board members.
The fraud wasn’t hidden because it was small or technical—it was hidden because it was enormous. Billions of dollars in customer assets had been diverted. This level of misappropriation couldn’t happen by accident or through negligence. It required deliberate action, cover-up, and coordination among FTX’s senior leadership. CZ’s decision not to request financial statements from FTX, while ostensibly reasonable given the competitive relationship, meant that Binance had zero visibility into these fraudulent activities. No external shareholder possessed the operational access necessary to detect what was occurring.
Binance’s Post-Collapse Legal Position
Following FTX’s bankruptcy, significant legal maneuvering emerged between the FTX estate and Binance. The bankruptcy trustees sought to recover funds from the 2021 exit transaction, arguing that the sale price or terms somehow benefited Binance at the expense of creditors. CZ declined to extensively discuss ongoing litigation in his interview, citing legal counsel’s guidance. However, he reiterated that Binance had no visibility into FTX’s internal operations while holding equity and therefore could not have been compensating itself for knowledge of fraud.
The legal disputes underscore a fundamental reality: once external investors exit positions in fraudulent enterprises, they’re unlikely to have material claims upon subsequent collapse unless the exit transaction itself was fraudulent or involved misrepresentation. Because Binance had maintained distance from FTX’s operations and hadn’t received special treatment or information during the exit, the litigation path forward remained uncertain. This illustrates how passive investment postures, while protecting against conflicts of interest during normal operations, provide limited recourse when fraud is later discovered.
What’s Next: Understanding Binance-FTX as Crypto’s Cautionary Tale
CZ’s detailed account of the Binance-FTX relationship provides value not as vindication for either party, but as a historical record of how institutional relationships functioned during crypto’s rapid scaling phase. The narrative isn’t one of prescient risk management by Binance or hidden corruption by FTX from the start—it’s messier than either extreme. Two competing platforms developed a financial relationship, recognized fundamental conflicts of interest, and eventually separated. That separation proved strategically sound, though not for the reasons that would later justify it.
For investors, entrepreneurs, and policymakers trying to understand crypto’s institutional evolution, the Binance-FTX history offers several lessons. Financial relationships between competitors require careful structuring around conflicts of interest. Passive investment positions provide distance from liability but also eliminate visibility into fraud. Aggressive competitive tactics—whether in regulation, talent acquisition, or client recruitment—can escalate tensions while masking underlying weakness. And perhaps most importantly, exchange collapse typically results from operational fraud and mismanagement, not from competitive pressure alone.
The broader cryptocurrency industry has moved substantially forward since FTX’s collapse, with regulatory frameworks tightening and institutional sophistication increasing. Yet the questions raised by examining this relationship remain relevant: how should crypto firms pursuing traditional banking relationships manage competitive dynamics, and what institutional safeguards can detect fraud before it destroys customer value. CZ’s willingness to publicly detail Binance’s perspective on this history contributes to that ongoing reckoning.
