Among the many things shattered in the collapse of FTX was the image of Sam Bankman-Fried as the crypto industry's benevolent king. Now the man who hastened his demise with a tweet appears to want that job for himself.
Changpeng “CZ” Zhao, head of Binance Holdings Ltd., issued a flurry of tweets and comments in recent days seemingly aimed at bolstering his credentials as crypto's standard-bearer, capping them Monday by announcing a fund to aid crypto firms in crisis.
That triggered a rebound in digital-asset prices even though he was short on detail. CZ also unveiled plans to help set up a global industry body for major crypto firms.
To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis. More details to come soon. In the meantime, please contact Binance Labs if you think you qualify. 1/2
— CZ ? Binance (@cz_binance) November 14, 2022
“Crypto is not going away. We are still here. Let's rebuild,” Zhao, 45, said in his Monday tweet thread announcing the recovery fund.
Other recent public comments have highlighted the need to re-establish trust in a sector rocked by a series of scandals this year. A spokesperson for Binance had no comment.
FTX's bankruptcy has rekindled concerns about everything from the legitimacy of crypto's leaders to the soundness of its fundamental structures, with former Treasury Secretary Lawrence Summers comparing the company to Enron Corp. — whose reorganization, coincidentally, was overseen by the man now tapped to run FTX.
So if the industry ever needed a unifying voice to quell the skeptics and shore up its crumbling credibility, it's now.
But Zhao's own role in the latest meltdown might complicate his status as the industry's champion, regardless of the fact that FTX's financial issues were likely long in the making, as highlighted in a Nov. 2 CoinDesk story. The Binance CEO is no stranger to the tweet-first-ask-questions-later ethos of crypto, an industry where leaders routinely use the platform to disparage each other.
Zhao's Nov. 6 tweet about selling a large chunk of FTX's native token FTT further unsettled crypto markets, with investors yanking some $5 billion from Bankman-Fried's exchange that same day. FTX quickly unraveled.
“CZ announced he was dumping half a billion worth of FTT for everyone to hear on Twitter,” said Max Gokhman, chief investment officer at asset manager AlphaTrAI.
“That's sort of like seeing someone at the bottom of a mountain and then kicking a snowball downhill. You know full well it'll create an avalanche.”
As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ ? Binance (@cz_binance) November 6, 2022
In an “ask me anything” appearance on Twitter Spaces on Monday, Zhao accepted some responsibility for the episode but said he didn't anticipate the fallout.
“Five years later, when we look back at this, the industry will become stronger because of this,” he said. “So as much as some people blame me for whistle blowing, or poking the bubble, I apologize for that. But I actually didn't know my tweet would cause so much change.”
Tensions between Bankman-Fried and Zhao, both so familiar inside and outside crypto that they go by their initials SBF and CZ, had been on full display for months before this crisis erupted.
Their Twitter dueling descended into outright acrimony in October with a since-deleted tweet from 30-year-old Bankman-Fried that appeared to question Zhao's status in Washington and by extension Binance's relationship with regulators.
With FTX gone and Bankman-Fried's reputation, career and fortune in tatters, Zhao stands as the lone giant of the industry. Binance handled almost half of global crypto trading volumes over the past week; runner-up Coinbase Global Inc. came in at just over 5%, data from CryptoCompare show.
Richest Man In Crypto
Yet even those numbers capture only part of Zhao's reach in crypto, with Binance a force in everything from venture capital to decentralized finance.
Except for Bankman-Fried, only Ethereum co-founder Vitalik Buterin, Coinbase CEO Brian Armstrong and Galaxy Digital founder Michael Novogratz enjoy anything similar to Zhao's global name recognition.
Zhao also wields an $18.2 billion personal fortune, according to the Bloomberg Billionaires Index, far more than anyone else in crypto.
“CZ and Binance are one of the few groups, perhaps the only one, that can fill the current vacuum in terms of clout and size,” said Toby Lewis, the CEO of crypto analytics firm Novum Insights.
Where Bankman-Fried struck deals to prop up stricken firms like Voyager Digital Ltd. and BlockFi, however, Zhao has so far stopped short of making major crypto rescue commitments backed by Binance's balance sheet.
It took him just over a day to pull out of a proposed deal to buy FTX after realizing what a precarious financial position his competitor was in.
As Bankman-Fried disappeared from view and rivals like Crypto.com's Kris Marszalek were forced to reassure customers that their funds are safe, Zhao kept a high profile, speaking at the Indonesia Fintech Summit and the Bali B20 event.
Below is a selection of comments he's made in recent days, on and off Twitter:
Nov. 11: “We have a two-word thing in Binance, just protect users.”
Nov. 12: “Going forward, I will break this policy a bit and be more vocal about issues I see in the industry.”
Nov. 13: “If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay #SAFU.”
Nov. 14: “Full disclosure: Binance never shorted FTT. We still have a bag of as we stopped selling FTT after SBF called me. Very expensive call.”
Nov. 14: “We will try to get together with other industry players to form common business standards. All industry players need to increase transparency and work closely with regulators to make the industry more robust.”
Ascending to the status briefly bestowed on Bankman-Fried and the comparisons with John Pierpont Morgan and Warren Buffett that came with it might require more than words.
Bankman-Fried was credited with helping to put a floor under this summer's crypto turmoil by agreeing to backstop Voyager and BlockFi — although the Voyager deal has since collapsed and BlockFi has been forced to suspend withdrawals.
It's not as if Zhao hasn't been active: Binance has committed $325 million to 67 projects so far this year, compared with $140 million for 73 projects in 2021, Bloomberg News reported in October. And Binance did bid for Voyager's assets, but lost out to FTX.
Buying A Bank?
Zhao has recently spoken about a desire to spend more on acquisitions, including potentially buying a bank. Where he's drawn a line, though, is at ailing crypto lenders.
“We did look at a lot of lenders in recent months, because that's where all the issues are,” Zhao said in an interview in October. “Many of them, they just take a user's money and give it to somebody else. There's not a lot of intrinsic value.”
Zhao's latest initiatives may yet land him the coveted status as industry savior, although details are scant.
Besides his Twitter announcement saying “more details to come” and inviting other industry participants to co-invest, Zhao didn't give any indication of how large the “recovery fund” will be, or how much Binance will put into it.
In his Twitter Spaces appearance on Monday, he said “four or five funds” have reached out about the initiative, without naming them.
He added that the recovery fund wasn't his idea but that “it came from one of our co-founders and we said, ‘Let's embrace it.'”
On plans for a new industry association, Zhao said: “This has been requested by multiple regulators to me. But this association will not be run by Binance, it will not be controlled by Binance.” The new body would serve as a point of contact between regulators and key crypto players on matters such as policy and best practices, he said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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