Binance, the most active and the largest by-volume cryptocurrency exchange in the world, recently announced the formation of a recovery fund that is planned to assist strong decentralized projects that are having liquidity issues. This news comes as FTX and Alameda Research proceed with one of, if not the most impactful crypto-related bankruptcy filings of all time. The developing story has been one of the most talked about and followed of all crypto-related news for greater than a week.
Binance CEO, Changpeng CZ Zhao has already specified that the fund was not created for, nor aimed to assist FTX. The Binance chief also expressed in a reply to a response in a recent tweet that “liars or fraud” would never qualify for funding assistance from the fund.
Details Of The Binance Recovery Fund
In a CZ tweet sent out during the early morning of Monday the 14th US time, Zhao specified that Binance was starting the fund “to reduce further cascading negative effects of FTX”. The only other information given in that particular thread was for interested projects to contact Binance Labs if they thought they may qualify for the funding aid. Binance Labs is the venture capital arm of the global crypto brand.
In the second part of the tweet (2/2), Changpeng Zhao extended the opportunity to other “industry players with cash” to join Binance by co-investing. There were several responses to the tweet which both celebrated the decision, and also asked deeper questions, but more remains to be seen still.
Definitely NOT For FTX
The clarification of the fund not being designated for FTX came by way of a reply CZ rendered to a response from a member of the crypto community to his initial tweet disclosing the establishment of the recovery fund. In his answer to the response, he asked “How would FTX have even qualified as strong but in a liquidity crisis?” CZ replied “Hey, you misread the tweet, I think. Liars or fraud never qualify as strong projects. This is for other projects in the ecosystem.”
The response from Binance’s chief left not much of a grey area if any at all in terms of the sentiment he and the leading crypto exchange hold with regard to the practices of FTX that recently surfaced. The insolvent exchange and over 130 affiliate companies have been heavily scrutinized since the revelation of liquidity issues, dangerously risky leveraged financial positions, mismanagement of customer funds, and many more questions and disturbing findings that have come to light over the past several days.
FTX issues began surfacing after customer withdrawals spiked, leading to their indefinite suspension as the liquidity issues compounded. After attempts to borrow and make deals to keep the doors open, finally, FTX, Alameda Research, the trading-specific arm, and all listed affiliates, filed for Chapter 11 bankruptcy just days ago, on November 11.
How Might The New Binance Recovery Fund Help Crypto Recover?
Many questions and thoughts were immediately posed about just how effective the Binance recovery fund can and just might be. While there is no way to tell just how effective the new recovery fund will be with any degree of certainty, it can be stated with 100% certainty that something is better than nothing. Although the impact of funds Binance sets aside for allocation to troubled entities behind the collapse of FTX is completely unknown, the decision to invite co-investing from other industry players could prove to compound the effects which could be seen.
The Binance chief added a very brief, yet powerful statement to the second part of the tweet sent out on Monday morning. The statement seemed to be the capitalization and highlight of the entire effort started by Binance. Most would agree that the resilience of the crypto market, and the companies operating therein, is being tested to a degree right now. It could be said that the way for the significant, yet still small and tight-knit digital assets market sector to optimally navigate forward, is together, and CZ made that clear in his final statement ending Monday’s tweet.
Crypto is not going anywhere. We are still here. Let’s rebuild.
Changpeng “CZ” Zhao, CEO, Binance
