On November 6, 2022, Binance's founder and then-CEO Changpeng Zhao tweeted about Binance's decision to liquidate its FTT holdings amid solvency concerns, causing controversy within the cryptocurrency industry.
The tweet by Zhao sparked significant distrust in FTX, leading to mass withdrawals and the eventual filing for bankruptcy by FTX. Binance denies allegations that it aimed to destabilize FTX.
Binance Liquidation Spurs Debate Over FTX Solvency
Binance’s announcement in 2022 to liquidate FTT holdings prompted questions about FTX’s financial health. This decision followed rumors regarding FTX and Alameda’s solvency, leading Binance to reduce risk exposure. Key figures include Changpeng Zhao from Binance and Sam Bankman-Fried from FTX. Management at FTX alleges Binance orchestrated a destabilizing campaign, but Binance maintains its actions were defensive, not aggressive.
Investor Confidence Plummets Amid Binance's Market Move
The market response to the Binance tweet was immediate, with investors losing confidence in FTX. This loss of trust resulted in a liquidity crisis, precipitating FTX’s rapid bankruptcy declaration. Following the event, Binance's liquidation triggered massive selling in FTT tokens, causing broader market volatility. Legal actions are now underway to scrutinize Binance's intent
