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Binance in potential risk of collapse

Binance, CZ, FTX, Sam Bankman-Fried, SBF, BUSD, BNB, FTT, IOU

Economy

Binance in potential risk of collapse

Here is alarming information for those who have money in Binance as according to experts, everything is most definitely not fine in this crypto exchange.

According to latest media exposure, back in 2019 – when Sam Bankman-Fried (SBF) was still golden and FTX was on the up-and-up – Binance, the largest crypto exchange by trading volume, invested in the now-defunct crypto exchange’s series A. In 2021, it exited that transaction after SBF bought out its stake for US$2.1 billion. That US$2.1 billion payment, according to Binance CEO Changpeng “CZ” Zhao, was received through a combination of BUSD, BNB, FTT and IOUs.

In an interview this week, Binance CEO CZ told CNBC’s “Squawk Box” anchors that, in fact, a “good chunk” of that payment was received in FTT – which, lest we forget, is now aggressively less valuable than an IOU – and that up until recently he had “actually forgot” about some US$580 million FTT that Binance had left over from the transaction.

When CNBC’s Becky Quick asked him point blank if Binance could feasibly cough up such a large amount, CZ responded with the physical manifestation of the meme above, inelegantly fumbling his way to a weak “we’re financially strong”.

Over the past week, people learned that Binance has experienced billions in net withdrawals as distrust swells and – though it hasn’t paused or appeared to have a problem processing them yet – uncertainty around the firm’s financial health looms larger.

In response, the only thing CZ has offered the crypto community is more red flags: evasive answers full of vague promises about “full audits” with no timelines; verbal assurances that the company is strong without any specific and verifiable evidence to support the claims.

Investors aren’t buying it anymore. Meanwhile, people are commenting on the collapse of FTX and subsequent arrest of its kingpin Sam Bankman-Fried, alongside the possible fate of Binance. Here are some of those comments:

Steve: So, it turns out crypto is not real dollars – what a shocker. It would be hilarious if the bankruptcy court forced them to cough up the US$2.1 billion and real money and tanked Binance. If anyone still owns crypto, they deserve to go to zero. Turns out fake money is well fake money.

Nancy: I like that even though crypto exists only as a computer algorithm everyone that supports it shows pictures of the crypto as gold coins in an effort to get you to think sub-consciously that crypto exists physically and is as good as gold.

Arnold: The Crypto Bubble has burst. Every Crypto investor should be scared.

Marc: If you have any assets in this Ponzi scheme, withdraw them now.

Rick: Wikipedia says, pyramid schemes are where each person in the pyramid is tasked with bringing in their own subordinates and in turn profiting from their sales. This fails because it essentially requires an infinite number of people to join. In a Ponzi scheme participant are promised returns on “investments”, supposedly into stocks or goods, but which are actually paid for by new investors, while a central leading figure takes a portion as profit. Crypto Currency, FTX and Binance are a little bit of both. The rush by dumb investors who were fearful of missing out then created a bubble and now the bubble is popping. The industry is unregulated because the original premise of crypto current is free from government control.

Richard: So, the company that trades fake money, paid other companies with fake money? And now all the fake money is gone and all the real money invested was spent in the Bahamas? I love this so much.

William: Binnace is going down. CZ is scrambling to try to keep a face of credibility and trust, yet his own outside independent auditor refuses to have any more to do with Binnace. He is fluffing in the media now, to try to use media channels to stop a continued run on his company. It will not work.

Jake: You should be fine as long as the Crypto is actually backed by real cash. Otherwise you just bought into a Ponzi Scheme and the last one out holds the bag.

Rob: This is getting uglier by the minute. Definitely the largest Ponzi of all time.

Monica: Its Monopoly game money ….can’t touch it, can’t put it in a safe place so nobody can steal it, can’t hand it over to your family as gift…has no value other than the game paying groupies imaginary value…can’t rent it out to generate income to pay for itself, does not appreciate at a steady pace…can’t get a loan against it to buy more…..need computer and electricity to look at it…..what a master scam of the century.

Thanatos: They’re a house of cards fraud propped up by their own fake crypto token just like FTX was. Pull everything you have out before they collapse.

Margarete: FTX and Binance are similar to unregulated banks without a Central Bank as a reserve. If Binance goes down, then future Crypto Currency will be difficult to store and trade. This is like having no banks to deposit your pay checks and your savings and no banks to help you pay your bills. With no banks, people will be forced to put their dollars in a mattress and then paying all their bills in cash. Similarly, this will make crypto currency very cumbersome and not convenient at all which was promised. The price of cryptocurrency will therefore decline. This may force some people to give up on crypto currency as being viable and go back to dollars.

Bruce: Garbage in garbage out. More and more evidence seems to be coming out that these crypto exchanges are using creative accounting to a degree that has never been conceived before. They appear to be creating a crypto that starts at zero. Allowing unsophisticated investors to set valuations, presumably believing these valuations allow for inflating a balance sheet and in turn allowing themselves in the case of Bankman-Fried or affiliated entities to use these valuations to allow other investors to borrow against directly or in the form of margin debt lever to buy other securities.

Assuming this is a sophisticated Ponzi it is always the collapse or loss of faith leading to collapse that exposes the Ponzi. That’s what happened to Madoff, the financial crisis ending his 20 year or more Ponzi and Bankman-Fried’s current Ponzi.

As these articles come out, we can only hope anyone with a functioning brain will see this is no place to invest your hard-earned money.

Sohail Choudhury is the Executive Editor of Blitz

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