Changpeng Zhao Won’t Rescue Binance by Selling out Crypto Self-Custody

In the aftermath of the collapse of FTX, many are justifiably concerned about the solvency of crypto exchanges. Sam Bankman-Fried’s fraudulent bucket shop may have been an outlier – court documents filed earlier this week by U.S. authorities allege that some $8 billion in FTX customer deposits were transferred to and lost by SBF’s “hedge fund” Alameda Research.

But following a decline in crypto prices, a drawdown of debt between highly interconnected firms and several bankruptcy filings that have locked up billions worth of assets in legal proceedings, it’s reasonable to wonder if there is as much money held on centralized, largely unaudited crypto exchanges as there should be.

This article is excerpted from The Node, CoinDesk’s daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

This is part of the reason why users are taking possession of their own coins in recent weeks. Binance, the industry leading centralized crypto exchange, in particular has seen a significant drawdown in funds. Some of its largest clients, such as Jump Trading, have taken coins out, and the exchange moved to temporarily halt USDC withdrawals amid the surge (potentially to execute a token swap to its own stablecoin).

See also: And Then There Was One – Changpeng Zhao – CoinDesk’s Most Influential 2022

Earlier this week, Binance CEO Changpeng “CZ” Zhao referred to this trend as “business as usual.” He also reportedly told employees to brace for a few “bumpy” months ahead. The exchange had published a so-called “proof-of-reserves” report conducted by auditing firm Mazars showing, depending on which figures you include, it was either over- or under-collateralized in its bitcoin holdings.

Not to draw an unnecessary comparison to FTX, but CZ’s public comments this week are reminiscent of Bankman-Fried’s attempts to quell fears in early November amid a “run” on the exchange before it filed for bankruptcy protection. On Nov. 7, SBF tweeted that client funds were safe and backed by deposits – a message he deleted after it became clear FTX was…

..

Source

Recommended For You

Leave a Reply

Your email address will not be published. Required fields are marked *