Caroline Ellison made a ‘fatal mistake’ that triggered the total collapse of FTX, Zhao says

Binance founder Changpeng Zhao (CZ) says Sam Bankman-Fried asked him for “a couple of billion dollars nonchalantly, as if he were asking for a bologna sandwich” during the phone call that preceded Binance’s attempt to acquire FTX in November 2022, and that he never had any intention of going through with it.

“I didn’t have any interest in owning FTX. I also wasn’t that interested in helping SBF,” Zhao writes in his memoir Freedom of Money, released Tuesday. “But we may have to step in to protect the users and the industry.” He signed the non-binding Letter of Intent, he says, purely as a formality: “I was explicit that we were not making any commitment. Our team would simply assess the numbers and then decide.”

On the collapse itself, Zhao is clear about where it unraveled. When Alameda CEO Caroline Ellison publicly offered to buy Binance’s FTT holdings at $22 each — an attempt to stabilize the market — Zhao says she made “a fatal mistake.”

“She had just revealed her floor price,” he writes. Professional traders immediately shorted FTT through that level. The token fell to $15, then $10, then $5. Within 72 hours, $6 billion had exited FTX.

Zhao also discloses the existence of “Exchange Collaboration,” a Signal group set up by FTX’s Zane Tackett during the Terra/LUNA collapse earlier that year, which included Zhao, Bankman-Fried, Brian Armstrong of Coinbase, Jesse Powell of Kraken and others. The group later attracted scrutiny from DOJ and SEC investigators. “They were keen to find any possible hint of collusion or market manipulation between the exchanges,” Zhao writes. “Of course there was no such thing in this case.”

By Nov. 9, Binance had walked away from the deal. Binance’s own FTT holdings — worth $580 million at their peak — had become “basically worthless,” Zhao writes, echoing the company’s $1.6 billion LUNA wipeout six months earlier.

The aftermath brought a bank run on Binance, with $7 billion withdrawn in a single day on Dec. 14. Zhao says he spent that evening at dinner with friends. “I was not worried,” he writes. “All user funds were in our reserves.” Within a month, he says, users had deposited it all back — and more.