After the FTX collapse, Binance co-founder and CEO Changpeng Zhao is grappling with challenges on numerous fronts.
As the industry deals with the high-profile fallout from FTX, billions of dollars are fleeing Binance, one of the world’s largest cryptocurrency exchanges. Further, Zhao has recently come under fire for being responsible for the FTX’s collapse, and he might be asked to return the $2.1 billion payment that Binance received when it sold its stake in FTX in 2019.
On Dec. 15, Zhao dismissed concerns that his company would be obliged to repay the money as a result of FTX’s bankruptcy proceedings.
The CEO also criticized Shark Tank investor Kevin O’Leary, known as “Mr. Wonderful,” for his recent comments.
“In my view, my personal opinion, these two behemoths that own the unregulated market together and grew these incredible businesses in terms of growing were at war with each other, and one put the other out of business intentionally,” O'Leary said.
One of the biggest uses of cash for FTX in the past, according to O'Leary, was the purchase of Binance’s 20 percent stake in the company.
The TV host was paid $15 million by FTX to become a paid spokesperson for the company. O’Leary purchased $9.7 million worth of various cryptocurrencies through the FTX exchange, investments he has since marked down to zero, he said during the CNBC interview.
On Dec. 9, Zhao fired back, calling these statements “baseless,” and accused O’Leary of aligning himself with a “fraudster.”
“We exited FTX 1.5 years ago,” the Binance CEO wrote on Twitter.
He went on to say that corporate profligacy of his rival, Sam Bankman-Fried, was the more likely cause of missing funds. “FTX invested in a myriad of companies, totaling to $5.5+ billion,” he said.
“On top of that, FTX spent money on Miami Stadium, multiple Super Bowl ads, baseball referees, F1, not to mention massive political donations and luxury real-estate.”
On Dec. 12, Bankman-Fried was arrested by Bahamas law enforcement at the request of U.S. prosecutors. The 30-year-old entrepreneur was charged with eight criminal counts, including wire fraud, commodities fraud, securities fraud, money laundering, and fraud against the United States.
“You won, @cz_binance. There’s no need to lie,” the FTX founder replied on Twitter.
“We initiated conversations around buying you out, and we decided to do it because it was important for our business.”
Binance Still a Mystery
Following the collapse of FTX, Binance is seeking to reassure customers about the safety of their holdings. Crypto exchange has started to release data to build trust, but the finances behind Zhao’s exchange “remain a mystery,” according to a Wall Street Journal article.Binance recently hired an outside accounting firm to create a “proof of reserve report,” disclosing some of the company’s financials. Falling short of a full audit, the report predominantly denotes bitcoin-denominated assets and liabilities.
“I can’t imagine it answers all the questions an investor would have about the sufficiency of collateralization,” Carmichael said. “It is a gross misrepresentation to call this an audit.”
