In November of 2022, Sam Bankman-Fried's FTX was teetering on the brink. The final collapse came at the hands of Changpeng Zhao—"CZ" to everyone in the industry—who tweeted that his company Binance was dumping its entire position in FTX's house token, FTT. The fire sale, along with a ham-fisted attempt by Bankman-Fried to defend the token, triggered a panic and FTX was bankrupt days later.
This storyline is familiar to anyone who has followed the harrowing events of the crypto industry in the last year. Michael Lewis's new book, Going Infinite, however, reveals new details about the bitter rivalry between the two crypto kingpins, including how Zhao laid a trap for Bankman-Fried more than a year earlier that would let him deliver the coup-de-grace last fall.
Before describing the trap, it's worth noting some of the gossipy details that Lewis unearthed about relations between the two men. This includes a revelation that Bankman-Fried, hoping to convey legitimacy on FTX, paid Binance $150,000 to appear on stage at a 2019 conference hosted by the company in Singapore—he "effectively paid CZ to be his friend" in Lewis's words. Zhao would later buy 20% of FTX for $80 million but only after rejecting an earlier overture to invest, leading Bankman-Fried to complain to the author, "He's kind of a douche, but not worse than a douche." The FTX founder would also complain during another spat that the Canadian-raised transnational Zhao had behaved "very Chinese" (another instance in the book of Lewis appearing to carry water for his protagonist).
As the uneasy alliance between Bankman-Fried and Zhao devolved into bitterness (and more cattiness), Zhao extracted a hefty premium in 2021 when the former sought to buy out his stake: "CZ demanded $2.2 billion. Just before they signed the deal, CZ insisted, for no particular reason, on an extra $75 million. Sam paid that too."
The most interesting part of that deal, though, is the currency in which Zhao demanded payment: mostly cash and Bitcoin, but also $500 million in FTT tokens and—critically—$400 million worth of a token called BNB held by FTX. That token, which Zhao had used to buy his stake in FTX in the first place, is Binance's own native currency.
The upshot is that, in the course of the transaction, Zhao acquired a hoard of FTT that he would later use to sink FTX—while also requiring his rival to hand over BNB that Bankman-Fried could have used as ammunition to dump in an attack on Binance.
Binance declined a request to comment on Lewis's finding, and it's possible, though unlikely, that there was no strategic motive for Zhao to include FTT and BNB in the buy-out transaction. The better guess is that, when it came to corporate skullduggery, the master gamer Bankman-Fried was playing checkers and Zhao was playing chess.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
