Arthur Hayes, co-founder and former CEO of crypto exchange BitMEX has warned that a decision by Binance to pull out of the FTX acquisition arrangement could plunge the crypto market into a deeper crisis.

Weighing in on the FTX liquidity saga Wednesday, Hayes noted that whereas Binance had expressed interest in purchasing FTX, Changpeng Zhao (CZ) still had the option of cancelling the deal, as there was no “firm commitment.”

“A non-binding LOI is nice, but a firm commitment by Binance to purchase FTX and ringfence all its liabilities would be nicer,” wrote Hayes. According to him, a decision to nix the deal would most likely be triggered by Binance discovering an irredeemably huge hole in FTX’s balance sheet.

“Imagine that Binance’s corporate finance folks are busy digging through the financials of FTX and Alameda. If the hole is too big, then I expect Binance will walk away from the deal. And if Binance can’t or won’t do the deal, no one will be able to swallow the losses billowing from FTX,” he added. According to reports, Binance is already conducting its due diligence on the Sam Bankman Fried-helmed crypto exchange.

What If FTX Can’t Find A New Home?

Recounting the whole process of FTX’s collapse and the “frying” of Mr Bankman-Fried, Hayes went on to warn that we could witness a Lehman Brothers’ moment for the crypto industry, worsening the already trampled crypto prices.

“Similar to Mt Gox, we will probably enter yet another high-profile bankruptcy situation where depositors queue up to recover what they can,” he added. Given how complex the holdings of FTX may be, Hayes further noted that recovery of any portion of deposits will likely take “a very long time.” FTX is believed to owe a considerable number of creditors a lot of money, which may come to bite as events unfold.

Since Sunday, capital has been sprinting for the exits following CZ’s announcement that Binance would sell all its remaining FTT holdings. (FTT is FTX’s native token). In the past week, over $6 billion of deposits fled FTX as the market tried to sniff out liquidity distress claims against Alameda and FTX.

In the past 24 hours, the global crypto market capitalization has dropped by over 15% to $823 billion, the largest single-day plunge since the Terra-induced sell-off in May. In the same period, Bitcoin, Ethereum and other cryptocurrencies suffered two-digit losses, with FTT dropping by over 82%.