BREAKING

Binance reveals $1 bil in recovery fund following FTX bankruptcy chaos

By Al Mayadeen English
Source: Agencies
25 Nov 2022 11:02

The FTX bankruptcy forces Binance to start a $1 billion recovery fund that could become $2 billion if the market needs it.

Binance recovery fund for FTX revealed (Reuters)

Famed cryptocurrency exchange Binance revealed updated details about its industry recovery fund on Thursday, which intends to support struggling players in the aftermath of FTX's disastrous bankruptcy.

Binance stated in a blog post that it will contribute $1 billion to the recovery fund as a first pledge.

The company also noted that it may expand that sum to reach $2 billion if needed.

Additionally, investment companies focused on cryptocurrencies including Jump Crypto, Polygon Ventures, and Animoca Brands have committed $50 million to the project.

We do this honestly, stated Binance CEO Changpeng Zhao as he published the public wallet address demonstrating the company's initial pledge.

It is worth reminding that Binance created the fund in an effort to support the cryptocurrency market after FTX, the exchange founded by businessman Sam Bankman-Fried, declared bankruptcy earlier this month.

Major banks see profits from crypto leftover, but FTX is a threat

As major banks and financial institutions steered away from what Jamie Dimon called a “decentralized Ponzi scheme,” the gap was filled by small lenders who saw profit in helping service companies that include but are not limited to, Silvergate Capital Corp., Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank and Customers Bancorp Inc. The latest crackdown and collapse of FTX puts them center-stage.

Silvergate goes back with cryptocurrency to when it first began with just Bitcoin. The former's CEO, Alan Lane, saw potential in building products to serve the market's needs: “What I saw,” he said, “was an opportunity to bank these companies that were essentially being de-risked from other banks.”

Lane set up a payment network that connects dollars and crypto, through his Silvergate Exchange Network (SEN), which offers users the opportunity to transfer around dollars between each in order to settle their crypto transactions any time during the day or night. The network passed $1 trillion in cumulative payment volumes earlier this year, with one customer being the infamous FTX, whose founder, Sam Bankman-Fried, is now disgraced.

"I'm really sorry, again, that we ended up here. Hopefully, things can find a way to recover," Bankman-Fried, nicknamed the 'King of Crypto', wrote on Twitter when the exchange collapsed "I was shocked to see things unravel the way they did."

Bankman-Fried tried to organize a bailout but failed - this left FTX struggling to raise billions of dollars and many customers unable to retain their money.

The win for Silvergate was that most of its profits were from deposits left by digital customers on its network, which amounted to 90% of the bank’s overall deposit base, almost $11.9 billion. They were later reinvested in securities to earn the $11.4 billion securities portfolio, which generated 2.2% over the three months to September.