Binance's Crypto Fund Tweaks Spark Concerns Over Industry Recovery Fund

Binance recently converted its SAFU fund to USDC, sparking questions about the status of its earlier 'Industry Recovery Fund' (IRF). The IRF, initially valued at $1.1 billion, was held in BUSD and intended to support projects facing liquidity crises. Despite Binance's claim of receiving support from several partners, few investments have been made public. The whereabouts of the IRF's funds remain unclear, as the Ethereum address disclosed by Binance no longer holds the original BUSD and no new disclosure has been provided.

Binance, the world's largest cryptocurrency exchange, has recently undertaken two significant changes to its financial reserves, sparking questions about the fate of its Industry Recovery Fund (IRF).

SAFU Fund Conversion:

Binance has announced the conversion of its Secure Asset Fund for Users (SAFU) fund into the USDC token. The SAFU fund, established in 2019, serves as a pseudo-insurance mechanism intended to protect users in the event of unforeseen platform disruptions. Prior to the conversion, the SAFU fund comprised various cryptocurrencies, including BTC, USDT, BNB, and TUSD.

This move has raised concerns, as it mirrors Binance's handling of the IRF. The IRF was launched in November 2022 amidst the FTX collapse, with the professed aim of assisting crypto projects facing liquidity crises. Despite an announced initial size of $1.1 billion, the IRF has remained shrouded in obscurity, with limited details about its operations and investments.

Industry Recovery Fund (IRF): A Tale of Ambiguity

Conceptualized by Binance CEO Changpeng Zhao, the IRF was touted as a lifeline for projects struggling in the wake of FTX's implosion. However, subsequent communications from Binance clarified that the IRF is not an investment fund but rather a platform through which individual participants, including Binance, independently evaluate and invest in distressed projects on a case-by-case basis.

Despite its substantial initial funding, the IRF has made few notable investments. Binance's predominant use of the fund has been to acquire a majority stake in GOPAX, a South Korean cryptocurrency exchange. The takeover remains pending regulatory approval.

Apart from the GOPAX investment, the only publicly disclosed allocation from the IRF has been an undisclosed sum invested in 13 other projects. Only two of these projects have been identified. Binance has declined to comment on the nature and extent of other potential investments.

Discrepancies in IRF Transparency and Accessibility

Adding to the enigma surrounding the IRF are discrepancies in the reported balance and composition of the fund. The initial $1 billion allocation was denominated in Binance USD (BUSD), a Binance-branded stablecoin. However, in March 2023, Zhao announced the conversion of the IRF's remaining balance from BUSD into BTC, BNB, and ETH.

Puzzlingly, the transfer of BUSD from the Ethereum address associated with the IRF was not met by a corresponding inflow of ether into the replacement address. Binance has yet to disclose the current location or status of the IRF's funds.

Appreciation in IRF Value

Despite the lack of transparency, the IRF's value has likely appreciated since its initial establishment. Since the BUSD transfer on March 13, 2023, the value of the three underlying cryptocurrencies has surged:

• Ether (ETH): $1,500 to $3,200
• Bitcoin (BTC): $22,000 to $66,000
• Binance Coin (BNB): $300 to $600

This indicates that the IRF's value has potentially doubled to over $2 billion, a development that could suggest the industry's recovery from the FTX collapse.

Binance's opaqueness surrounding the Industry Recovery Fund has raised eyebrows, leaving industry observers to speculate on the purpose, management, and utilization of the substantial pool of funds. The questions surrounding the IRF cast a shadow over Binance's commitment to transparency and accountability.