Billionaire Changpeng Zhao who attempted to bail out cryptocurrency exchange FTX less than a week ago is now calling its founder and former Chief Executive Officer a liar.
After agreeing to bail out Sam Bankman-Fried and his company FTX on Nov. 8, Zhao reversed course the following day. He now believes that the former CEO lied and should receive the majority of the responsibility for the firm's meltdown.
"They lied. FTX lied. I think Sam lied to his employees, his users, his shareholders, regulators all around the world and all the users," he said during a Twitter event on November 14. "So yes, he should take most of the blame."
FTX's collapse was the fault of many players, said Zhao, who is known as "CZ" in the crypto sphere and founded Binance, during a Twitter AMA event.
Binance invested in FTX in 2019 and Zhao was asked if the company contributed to the exchange's collapse.
'A Bad Actor'
He said the company can not bail out crypto companies whenever there are liquidity issues, stating that "if a bad actor just wants to be a bad actor, you can't prevent it."
Investors such as Binance itself, along with the venture capital firms and pension funds who invested in FTX, should take on some of the blame since they did not detect any of the fraud, Zhao said.
Venture capitalist Sequoia Capital said it lost $210 million to FTX, while the Japanese firm SoftBank has quantified its losses at $100 million.
Ontario Teachers' Pension Plan, Canada's third-largest pension fund, invested $75 million in FTX International and its U.S. entity, FTX.US, in October 2021. In January, the pension fund made an additional investment of $20 million in FTX.US.
The Canadian pension fund's investment was part of the $420 million that FTX raised in October 2021 that include other major investors such as Temasek, Sea Capital, IVP, ICONIQ Growth, Tiger Global, Ribbit Capital, Lightspeed Venture Partners, and funds and accounts managed by BlackRock.
Zhao announced the creation of a fund that will serve as a bank for crypto firms facing a liquidity crisis.
The group indicated that solid projects will be the sole beneficiaries of this emergency fund.
"To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis," Zhao announced on Twitter. "More details to come soon. In the meantime, please contact Binance Labs if you think you qualify."
The Debacle
Binance Labs is the financial arm of Binance. The billionaire did not give further details on this fund. Zhao has an estimated fortune of $18.2 billion as of November 13, according to Bloomberg Billionaires Index.
Until its crash on Nov. 8, FTX was an exchange where you could buy and sell cryptocurrencies like bitcoin, was considered one of the most financially sound companies in the world.
In February, FTX was worth $32 billion while its former CEO Bankman-Fried, 30, was one of the richest men in the world with a fortune valued at $15.6 billion. It is now wiped out.
The insolvency of FTX, which filed for Chapter 11 bankruptcy on Nov. 11, appears to have occurred when Bankman-Fried reportedly transferred $10 billion of customer funds from FTX to his cryptocurrency trading platform Alameda Research, according to Reuters, which cites two sources that "held senior FTX positions until this week."
FTX faces a shortfall of $1.7 billion, one source told Reuters, while the other source said between $1 billion and $2 billion was missing. Bankman-Fried was once hailed as the savior of the sector during the liquidity crisis of last summer.
In addition, FTX had used its FTT token as collateral on loans.
