Binance CEO on FTX saga “Not every firm on Wall Street is Madoff”

abdelaziz Fathi

Binance founder Changpeng Zhao (CZ) marked Binance’s sixth anniversary with a sentimental message to the exchange’s community, reflecting on their milestones, challenges, and future vision. CZ also reflected on how he feuded with Sam Bankman-Fried before FTX collapsed in stunning fashion in late 2022.

FTX

CZ began by reminiscing about Binance’s modest beginnings. What started as a simple ICO in 2017 quickly grew to become a touchstone of the crypto industry with billions of dollars in volume. Despite initial hurdles, the platform rapidly expanded its token support, multilingual services, and customer support team, he said.

The Chinese-born, Canadian entrepreneur recounted a pivotal moment when Binance faced a challenging test in 2017. At the time, the exchange’s headquarters were originally located in China, but as Beijing began passing outright bans on crypto, Binance proactively used $6 million from its treasury to compensate affected users. This move, despite being a young startup with limited resources, earned overwhelming support and contributed to Binance’s subsequent growth and profitability.

“Our team did some calculations and called me. They asked if we should use our own funds to make our users whole. The total cost would be US$6m, which at the time was a huge sum. We all unanimously agreed. The call lasted for about 5 minutes while I was on a moving train. US$6m was more than 40% of our treasury at the time, amounting to the largest single spend in Binance’s history by percent. We were not profitable back then, and were burning money as a 2-month-old start-up, hiring people and buying servers, etc,” he states.

After the incident, it didn’t take long for Binance to become the world’s largest exchange by trading volume, with it reaching that mark in 2018. Then, the company looked to grow.

CZ also highlighted Binance’s focus on compliance and innovation, emphasizing the importance of regulatory cooperation. Their licensing and registration across 17 countries have built trust with regulators, shaping the industry’s long-term success.

The founder addressed the challenges faced during crypto market downturns. Binance’s resilience and ability to adapt were showcased as it emerged from the 2018 and 2022 crypto winters with minimal exposure to catastrophic events that affected other projects, he said.

CZ also reflected on the collapse of FTX, which intensified the regulatory spotlight on centralized cryptocurrency exchanges. The world’s largest crypto exchange walked away from a deal to acquire the troubled platform, leaving the smaller rival on the brink of collapse after a surge of withdrawals.

While founder Sam Bankman-Fried has blamed the final nail in the coffin of FTX on a well-orchestrated plan carried out by CZ, the latter played down his personal role in the series of events that ultimately led to the historical fiasco.

Since then, regulators, lawmakers, and traditional finance pundits have called on Binance to undergo audits of their financial control systems. While CZ has made some concessions to address these demands, it continues to face skepticism and a presumption of guilt until proven innocent.

“When FTX crashed we tried to help. We signed a LOI to do a deep DD (due diligence), but soon found we couldn’t get involved in the deal. That was the extent of our (non) involvement in the matter. Even then, a few regulators or news outlets tried really hard to group Binance and FTX together. To that, I will just say: We are different. Not every investment firm on Wall Street is Madoff.”

Looking ahead, CZ discussed industry trends, such as the increasing involvement of traditional finance giants in the crypto space. He expressed confidence in the future of decentralized finance (DeFi), predicting its surpassing of centralized finance (CeFi) as newer wallet technologies make blockchain-based financial products more accessible.

CZ acknowledged regulatory hurdles and affirmed Binance’s dedication to working with regulators worldwide, even if legal action was required, in order to protect users’ interests and advance the industry.

In closing, CZ expressed deep gratitude to the community, recognizing their feedback, passion, and contributions to the ecosystem. He highlighted the user-centric approach that guides Binance’s product development, services, and innovations.

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