While U.S Federal prosecutors investigate FTX FTT/USD and its founder Sam Bankman-Fried for fraud, the role of Binance BNB/USD founder Changpeng Zhao in this saga is often overlooked.
Recall when Zhao, or "CZ" as he is known within the crypto world, announced via Twitter that Binance would acquire FTX. That was when the initial cracks appeared in FTX appeared just a few days after signaling his companys intention to offload its entire FTT token holdings.
If this seems suspicious, then Zhaos complete u-turn should have sounded an alarm. Binance subsequently scrapped the FTX deal and what was once the worlds third-largest cryptocurrency exchange by trading volume went bankrupt.
See Also: Binance Intentionally Put FTX Out Of Business, Kevin O'Leary Says In US Senate Testimony
Sketchy dealings between FTX and its sister firm, Alameda Research (using customer assets to make risky trades without approval) sent shockwaves throughout the crypto world.
The episode laid bare the fact that centralized exchanges, despite how they portray themselves to the crypto community, can exert complete control over their users crypto assets even while their own operations remain shrouded in mystery.
FTXs lightning-fast collapse threatens to topple well-established crypto firms, and investor trust is now eroding at an alarming pace within the crypto ecosystem.
What About The Other Poster Boy Of The Crypto World?
It is important to address the state of Binances own financial condition.
When the U.S. Department of Justice was reportedly preparing to file charges against Binance, citing unlicensed money transmission and conspiring to launder money. The firm disputed the report and claims to have implemented anti-money laundering (AML) controls in 2021.
The investigation stems from Zhaos actions dating back to 2018, or perhaps earlier. Binance had failed to register with the Department of Treasury, despite its own claims that nearly one-third of its user base at the time of its launch was based in the U.S.
See Also:Binance CEO Warns Staff To Gear Up For A Bumpy Ride Ahead
Why Binance Could Buckle Under Liquidity Pressures
Apart from Zhao and his teams varied responses on how they have built the strongest firm in the crypto industry, there is nothing to prove that all is well at Binance.
Centralized exchanges like FTX and Binance concentrate immense power and control in the hands of their founders. While it can be said that Bankman-Fried's negligence brought about FTXs bankruptcy, it remains to be seen whether there is enough evidence to suggest thatZhao could be thwarting attempts to uncover wrongdoing on his part.
Any loss of trust in Binance, the largest cryptocurrency exchange by trading volumes, could unleash a wave of selling pressure that could push it into bankruptcy and decimate the crypto market.
While it may seem far-fetched that Binance could succumb to financial irregularities, it is important to remember how Bankman-Fried maintained an aura of calm while he went about lobbying with U.S. lawmakers for more relaxed guidelines.
Next:Binance Temporarily Stops USDC Withdrawals As Investor Concerns Over Reserves Mount
