Recall that tonight Binance refused to buy FTX, deeming such a move financially impractical. In addition, the company has been embarrassed by regulatory attention, such as the SEC, which has focused on the exchange. Withdrawals from FTX are now officially closed, and Bankman-Frieda has debts of up to $8 billion on its balance sheet. That is the amount needed to meet user withdrawal needs.

As FTX investors have pointed out, if there is no way to fill the liquidity hole and find funds, the company is likely to be declared bankrupt. In fact, this explains the current attempts of the company’s management to find money in any way possible.

Why cryptocurrencies have fallen

Here is a translation of Zhao’s tweet published by news outlet Cointelegraph. In it, the entrepreneur shared an interim summary of the situation.

Two big lessons: never use your tokens as collateral. Don’t borrow if you have a big business in crypto. Don’t use capital “efficiently”. Have a large reserve. Binance has never used BNB as collateral and we have never borrowed.

Binance CEO Changpen Zhao

The fact is that FTX had previously used a native exchange token called FTT to lend to Sam-affiliated trading company Alameda Research. Alameda was rumoured to have gone bust back in the second quarter of this year, when the collapse of the Terra project ecosystem and the bankruptcy of major crypto fund Three Arrows Capital occurred. In an attempt to postpone the inevitable, Sam Bunkman-Fried used a pledge in FTT to “fix” Alameda’s financial situation.

The company has also used client money for trading purposes. And while this is a fairly popular practice among companies, especially if they simply hold neutral positions while hedging them in other venues, Sam's team clearly got carried away with trading and leveraging. Hence the lack of capital that has led to the current situation.

As you can see, a serious blow to the company’s reputation was enough to make the house of cards fall apart. The final blow for Alameda was the public announcement from Binance about the sale of FTT tokens amid a leaked financial report from the company, in which balance sheet problems were evident.

FTT exchange rate on 1-day chart

Zhao believes that cryptocompanies should be as transparent as possible to both regulators and their customers. That’s why Binance will soon provide public proof that it has sufficient reserves to survive the bearish trend in crypto.

Note that Binance has already shared the debut of such proof of its own reserves. In today’s publication, the exchange revealed a full list of its own hot and cold wallets, which hold bitcoins, ethers, as well as USDT, USDC and BUSD staples. The list makes it clear that the platform has more than enough stock.

USDT staplecoin stocks on the Binance exchange

All of this is the money of users who have deposited their own coins on the platform. Accordingly, the table does not show whether the total amount of coins corresponds to the total amount of cryptocurrencies of the users. However, the company will clearly fix this in the future.

The second point in the tweet is the strong recommendation not to borrow from other companies and industry funds. This is important because the collapse of one market player could drag other firms down with it. The liquidation of a large number of them in the second quarter of this year accelerated the fall in the price of Bitcoin. It is likely that many cryptocurrency companies are financially linked to FTX, so another wave of bankruptcies could await us in the coming weeks.


We believe that in the long run, what is happening today will be positive for the cryptocurrency world. All the same, popular exchanges will now take it as a rule to report their own reserves and confirm this information. Consequently, users will have confidence that they can withdraw their own coins at any time. In addition, this approach will clearly improve the perception of the industry in the eyes of regulators, who are predictably not thrilled with the current situation and the preliminary billion-dollar losses of investors.


Stay tuned for more developments in our Millionaires Crypto Chat. There we talk about other topics related to the world of blockchain and decentralisation.

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