HomeBusinessBinance Creates $1 Billion Crypto Industry Fund After FTX Collapse
Binance Creates $1 Billion Crypto Industry Fund After FTX Collapse
November 24, 2022
Binance co-founder and CEO Changpeng Zhao has given several interviews discussing the outlook for cryptocurrency after a turbulent few weeks in the market.
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Cryptocurrency exchange Binance on Thursday released new details about its industry recovery fund, which aims to support struggling players in the wake of FTX’s catastrophic bankruptcy.
In a blog post, Binance said it will commit $1 billion in initial commitments to the recovery fund. It may increase that amount to $2 billion at some point in the future “if the need arises,” the company added.
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It has also received $50 million in commitments from crypto-native investment firms including Jump Crypto, Polygon Ventures and Animoca Brands.
Binance CEO Changpeng Zhao shared the public wallet address showing its initial commitment, saying, “We’re doing this transparently.” Public blockchain data reviewed by CNBC showed a balance of about $1 billion in Binance’s own BUSD stablecoin.
BUSD is a stablecoin issued by blockchain infrastructure company Paxos and is authorized and regulated by the New York State Department of Financial Services, according to Paxos’ website.
The fund is an attempt by Binance to keep the crypto industry afloat after controversial entrepreneur Sam Bankman-Fried’s exchange FTX filed for bankruptcy earlier this month.
Zhao has emerged as a new savior-like figure for the ailing industry, filling a hole left by Bankman-Fried, whose firm had bought or invested in a number of beleaguered crypto firms — from Voyager Digital to BlockFi — before its collapse.
FTX’s failure was partly triggered by a tweet posted by Binance’s CEO, which drew attention to a CoinDesk report that raised questions about its accounting. Since FTX’s swift liquidation two weeks ago, investors have been worried about a possible crypto contagion affecting every corner of the industry.
In the first hearing of the bankruptcy case on Tuesday, an attorney for the company delivered a damning verdict on FTX and its management, saying the company was run as Bankman-Fried’s “personal fiefdom.”
Binance said the vehicle is “not an investment fund” and is intended to support companies and projects that “through no fault of their own are facing significant short-term financial difficulties.” Zhao has previously said that it is his intention to prevent further “cascading contagion effects” from FTX’s collapse.
Binance said it expects the program to last about six months. It accepts applications from investors to contribute additional funds.
Binance said it is “flexible on the investment structure” and accepts contributions in tokens, cash and debt. “We expect that individual situations require tailored solutions,” the company added.
About 150 companies have already applied for support from the fund, Binance said.
The crypto markets did not react significantly to the news. In the past hour, bitcoin rose about 0.2%, while ether traded flat for the session.
Thin trading volumes are expected in the US as Americans celebrate the Thanksgiving holiday.