In an unusual sequence of events, a social media spat about liquidity worries between Binance and FTX quickly led the former to issue an agreement to acquire the latter. Now, there are concerns about regulatory risks from the proceedings.

Immediately after Binance founder Chanpeng Zhao’s announced a non-binding agreement to acquire Sam Bankman-Fried’s FTX.com, onlookers started highlighting concerns about potential violations of antitrust laws.

Of note is the public exchange of social media posts between Zhao and Bankman-Fried. Aside from the swift fashion in which the deal was announced and stakeholders were informed, there are also worries that Binance may have acted to protect FTX.

Antitrust Law

In the US, antitrust laws like the Sherman Act prohibit market participants to engage in anti-competitive agreements or monopolistic behavior in order to protect consumers.

In the case of the Binance-FTX agreement, market watchers noted that Zhao’s tweet may have reflected anti-competitive behavior as he said that the firm would protect users after FTX had asked for help.

«Next time, check the compliance of your tweet with antitrust laws before you post,» said Thibault Schrepel, an associate professor at Amsterdam University, in a social media post. «At this stage, I wouldn’t be surprised to find this tweet in a forthcoming court document/antitrust litigation.»

Headquarter Location Irrelevant

While some may be quick to point out that FTX is based in the Bahamas, Schrepel noted that the relevant laws would remain applicable based on the location of operations. 

«This is not relevant for the purpose of merger control: all that matters is where you operate, not where you are based,» Schrepel added.

China Factor

There are also concerns that linkages to China could raise additional red flags with US regulators. 

Binance was founded in China in 2017 before moving its headquarters out of the country in advance of a nationwide crypto ban in the same year. While Zhao – a Jiangsu native who moved to Canada in the late 1980s – has since pushed back against the label of being a Chinese firm, political factors could still motivate greater scrutiny by US authorities. 

Regulatory Stance

Interestingly, Bankman-Fried and Zhao have previously expressed opposing stances with regard to crypto regulations with the former calling for tighter supervision while the latter supported a freer market. 

«I’m sorry I didn’t do better, and am going to do what I can to protect customer assets, and your investment,» Bankman-Fried wrote in a letter to investors following Binance’s acquisition announcement. «I wish I had more details for you guys right now; I don’t yet.»

After a brief rally to $19.33, FTT – FTX’s token – plummeted by three-quarters to around $5, according to data from CoinMarketCap.