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Binance chief attempts to allay customer concerns after outflows
Joshua Oliver, Scott Chipolina
4–5 minutes
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Binance chief executive Changpeng Zhao has blamed the collapse of FTX and the fraud charges levelled against its founder Sam Bankman-Fried for a wave of withdrawals that struck the world’s largest cryptocurrency exchange this week.
Zhao sought to reassure nervous customers on a Twitter ask-me-anything discussion that
Binance is financially healthy after clients pulled more than $1bn from the trading venue, the highest daily withdrawal since June.
“There is no amount of withdrawals that would put us under pressure,” Zhao said.
Crypto investors have been jittery after a wave of withdrawals from FTX in early November turned into a “run on the bank”, which forced the Bahamas-based company into bankruptcy. US prosecutors on Tuesday
charged FTX’s former boss Bankman-Fried with orchestrating a years-long fraud to divert funds clients entrusted to the exchange into risky loans and investments.
On Tuesday, Brian Armstrong, chief executive of Coinbase, the US-listed exchange, also tried to reassure investors on Twitter that their crypto deposits were safe. “Lots of fear out there in the markets,” he said. Armstrong added Coinbase was “well capitalised” with a $5bn balance sheet and that its customers’ assets were “backed 1:1”.
Zhao said Bankman-Fried’s arrest on fraud charges in Nassau on Monday contributed to the uptick in investors pulling money from Binance. “With SBF’s arrest, people generalise . . . People get hurt by one exchange, they lost money there, and they generalise that. That is just human behaviour,” he added.
Fielding questions from Twitter users, Zhao did not address concerns that Binance itself could be a target for US authorities. Reuters on Monday reported that the company faces a criminal investigation in the US over its handling of US money laundering and sanctions laws. Binance said it would not be appropriate to comment on any US investigation.
Asked if he would travel to Washington DC to speak about crypto regulation, Zhao said he avoided visiting America to ensure a public separation between the international and US arms of Binance to comply with US regulation. “I try not to go to the US so that Binance [international] will not be seen as soliciting users from the US.”
Zhao’s public intervention comes at a time when investors’ fears about Binance appear to have eased. The exchange received net inflows of $1.4bn in the past day, according to research group Nansen’s analysis of public blockchain transactions. In the past week, investors had pulled net $1.5bn from the exchange, Nansen said.
