Binance Pledges Up To $2 Billion To Bail Out Struggling Crypto Firms As FTX Contagion Spreads

Binance, the world’s largest cryptocurrency exchange headed by billionaire Changpeng Zhao, is committing up to $2 billion to help support crypto companies facing financial difficulties following the bankruptcy of rival exchange FTX.

In a statement released late Thursday, Binance said that it will establish a $1 billion recovery fund with the intention of increasing the amount to $2 billion in the near future “if the need arises.” The exchange operator has received a total of around $50 million in an initial commitment from seven investment firms, including Hong Kong-based Animoca Brands and Jump Crypto, the digital asset arm of Hong Kong-based merchant store Jump Trading. Chicago.

His rescue plan comes as former billionaire Sam Bankman-Fried’s FTX is undergoing bankruptcy proceedings, which has brought a growing number of cryptocurrency companies that have been exposed to the trading platform and its businesses to the brink of collapse. related. The companies include Genesis Global Capital, the crypto lending subsidiary of American billionaire Barry Silbert’s digital currency group, as well as Blockfi, the crypto lender that had received lines of credit from FTX.

Binance said it is looking to back companies and projects that “through no fault of their own, are facing significant financial distress in the near term.” The initiative, which will last approximately six months, could involve instruments such as crypto tokens, fiat currencies, equity, debt, or lines of credit. So far he has received 150 requests from companies seeking help.

The implosion of the Bankman-Fried crypto empire was sparked by a tweet posted by Zhao, co-founder and CEO of Binance, announcing a planned FTX crypto token sale. The tweet drew attention to a Coindesk report that raised concerns about the financial health of FTX. Since then, FTX has seen a bank run and descended into a liquidity crisis when Binance abandoned its deal to bail out the crypto exchange, citing due diligence, “the latest news reports about the mishandling of client funds and the alleged investigations of the US agency”.

The UK Parliamentary Treasury Committee last week asked Binance to explain the circumstances surrounding Zhao’s tweets and whether the company understood the potential consequences it could have, according to Bloomberg. However, lawmakers said the evidence Binance presented was disappointing and unacceptable.

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