Binance puts up a brave face even as investors pulled US$6 billion in 3 days from the world’s largest cryptocurrency exchange

Traders withdrew US$6 billion between December 12 and 14, Binance acknowledged
Binance would sell roughly US$530 million of FTT – the coin minted by FTX – still in its possession. The stash was valued at US$2.1 billion in November

FTX

Tracy Quin Shanghai

Published: 10:00pm, 23 Dec, 2022

Why you can trust SCMP

Traders withdrew US$6 billion in three days from Binance, according to the world’s largest cryptocurrency exchange, as it assured investors who have been spooked by FTX’s collapse that it has enough capital to sustain its operations.

The mass withdrawals from December 12 to 14 were all honoured, Binance said in a Chinese-language blog post on its website, which maintained that its financial situation is sound and that it is not facing any liquidity crisis, without divulging the amount of capital it has.

The statement was the first acknowledgement by Binance in the face of mass withdrawals following the November 11 bankruptcy of its smaller rival FTX. The implosion of FTX, whose founders had been accused of fraud and embezzlement, snared tens of thousands of traders with billions of dollars in funds as they were unable to recover the money they had deposited for transacting cryptocurrencies.

“Facts proved that we will win the trust of more users after this storm,” Binance said in its blog. “Binance will not embezzle users’ funds for any transaction or investment. It neither has debts, nor is it on the creditors’ list of any company that has recently gone bankrupt.”

Zhao Changpeng, founder and chief executive officer of Binance spoke during an event in Athens on November 25, 2022. Photo: Reuters.

The cryptocurrency world is facing a bleak winter, with the prices of most coins including bitcoin down by double-digit percentages from their peaks. The pressure intensified after FTX imploded in the face of US$8 billion in shortfalls on its books, when it failed to honour the withdrawals of traders.

The contagion has since spread to all things cryptocurrency, causing token prices to fall further. Several other cryptocurrency lending firms like the Hong Kong-based Auros, and other trading platforms have folded in recent weeks including, caught up in the wake of FTX’s collapse.

“A few negative cases do not represent the entire industry,” said Binance’s founder and chief executive Zhao Changpeng – known as CZ in cryptocurrency circles – in the statement.

Binance would sell roughly US$530 million of FTT – the coin minted by FTX – still in its possession. In November, the stash was valued at US$2.1 billion, according to Zhao’s tweet.

Earlier this month, Binance’s auditing partner Mazars abruptly cut its ties with cryptocurrency clients, raising more concerns about whether other cryptocurrency exchange can be trusted after the FTX collapse. Binance said in the article that the move is not targeting on Binance, but all cryptocurrency enterprises.

FTX founder Sam Bankman-Fried (center) arrived at the Magistrate Court building for a hearing in Nassau of the Bahamas on Wednesday, Dec. 21, 2022 before his extradition to the United States to face embezzlement charges. Photo: AP

Binance said there is no need for the firm to disclose detailed financial information, as it is a private company and is “financially self-sufficient, with no external financing needs and external investors, and has no intention of going public at this stage.”

The price of bitcoin has fallen to about US$16,818 today, only a quarter of its peak more than a year ago. Ethereum, another popular coin, is also trading at only a quarter of its peak.

In an exclusive interview with the Post, Zhou Wei, former chief financial officer of the world’s largest cryptocurrency exchange Binance, said the cryptocurrency market will remain depressed for a long time with more restrictive regulations on the way after the FTX collapse.