Binance Launches Recovery Fund to Address FTX Fallout

Binance Unveils Recovery Fund to Mitigate Fallout from FTX Collapse

NUSA DUA, INDONESIA (Reuters) - Binance, the world's largest cryptocurrency exchange, has announced plans to establish a fund to assist crypto projects experiencing liquidity shortages in the wake of the catastrophic collapse of FTX, a prominent rival exchange.

Binance CEO Changpeng Zhao disclosed this initiative via a tweet on Monday, emphasizing its intention to alleviate "further cascading negative effects" stemming from FTX's demise. The fund will prioritize "otherwise strong" projects that are currently facing liquidity constraints.

While Binance has remained mum on the fund's projected size, the move underscores the profound impact of FTX's collapse on the crypto industry. The exchange filed for bankruptcy on Friday after experiencing a massive exodus of user withdrawals, totaling $6 billion in crypto tokens withdrawn within 72 hours.

Zhao's actions have been instrumental in triggering FTX's downfall. On November 6th, he announced via Twitter that Binance would be liquidating its entire holdings of FTT, FTX's native token. This decision sparked investor trepidation regarding FTX's financial health. Subsequently, on November 8th, Binance expressed consideration for a rescue deal with FTX, a move later abandoned following due diligence.

In a speech delivered on Monday to G20 leaders attending a summit in Bali, Zhao emphasized the urgent need for stable and transparent regulations in the wake of FTX's collapse and the prevailing "cutting corners" within the industry.

"We're operating in a young industry, and as recent events have demonstrated, things can spiral out of control," Zhao stated. "Implementing robust regulations is paramount to ensure stability and consumer protection."

He further elucidated that the industry as a whole has a shared responsibility to safeguard consumers, not solely relying on regulatory oversight. Over the weekend, Zhao announced via Twitter that Binance had suspended deposits of FTT tokens on its platform, urging other exchanges to follow suit.

"Binance has never engaged in FTT short-selling," he asserted in another tweet on Monday. "We still hold a portion of (FTT), having ceased sales after receiving a call from Sam Bankman-Fried (SBF). It was a very costly call indeed."

As the crypto industry continues to grapple with the implications of FTX's collapse, Binance's recovery fund represents a proactive step toward fostering resilience and mitigating further systemic risks.