Two giants of cryptocurrency trading are joining forces. Binance, the world’s largest crypto-trading platform by volume, has signed a letter of intent to acquire FTX, headed by prominent crypto billionaire Sam Bankman-Fried. Here’s what it all means.

The context: Bankman-Fried made headlines over the summer by bailing out distressed crypto firms hit hard by a broad collapse in digital asset prices, comparing himself to J.P. Morgan, the financier who organized bank bailouts during the financial panic of 1907. But the tables have turned. Early last week, CoinDesk reported that a significant share of FTX sister company Alameda’s US$14.6 billion in assets is comprised of FTX’s native crypto token FTT, raising concerns about the two firms’ solvency and close ties. Then, on Sunday, Binance CEO Changpeng Zhao announced plans to liquidate the company’s position in FTT in light of the CoinDesk story. A crypto rout followed and reports emerged of withdrawal delays on FTX amid the crypto equivalent of a bank run. Bankman-Fried, who had previously tweeted FTX was “fine,” called the agreement to sell to Binance “a user-centric development that benefits the entire industry.”

Why it matters: Bankman-Fried said the acquisition resolves FTX’s liquidity issues, protecting customers. For the crypto platform’s investors—which include the Ontario Teachers’ Pension Plan—it may be a different story. Ontario Teachers’ invested in fundraising rounds for FTX in October 2021 and January 2022, the latter of which valued the platform at US$32 billion. Crypto prices have since crashed significantly, and some companies have fundraised at lower valuations. Fellow Canadian pension fund Caisse de dépôt et placement du Québec is currently in bankruptcy court to stake a claim on proceeds from the sale of the assets of Celsius, a crypto lender that fell victim to the summer crash. In September, Ontario Teachers’ CEO Jo Taylor told Reuters its investment in FTX carried “the lowest risk profile you can have” in the crypto sector. Ontario Teachers’ spokesperson Dan Madge declined today to comment.

The reaction: Podcast host and former Bloomberg reporter Eric Newcomer called the sale a “dot-com bust level event,” because of FTX’s recent funding rounds at a lofty valuation featuring prominent investors such as Sequoia and Paradigm. Adam Back, CEO of Victoria-based Bitcoin company Blockstream, said Bitcoiners, who are known for refusing to invest in cryptocurrencies other than Satoshi’s original, were watching from “in the citadel.” In an interview with The Logic, Dean Skurka, president and interim CEO of Vancouver-based crypto company WonderFi, which owns the trading platforms Bitbuy and Coinberry, said the drama highlights the risk of using platforms that aren’t registered with Canadian regulators. “It is buyer beware,” he said.