Former Binance Chief CZ Denies Exchange's Role in Historic Crypto Market Collapse
Changpeng Zhao, who previously led Binance, dismisses allegations that the platform contributed to the October cryptocurrency liquidation crisis worth $19 billion, asserting the claims are unfounded.
Changpeng "CZ" Zhao, the former chief executive of Binance, has dismissed accusations suggesting the digital asset exchange contributed to what became the most significant liquidation event in cryptocurrency market history, a massive sell-off whose impact continues to reverberate through the industry more than three months after the event occurred.
During a question-and-answer forum conducted through Binance's official social media platforms, Zhao refuted suggestions that Binance bore significant responsibility for the unprecedented cascade of forced liquidations that occurred on Oct. 10, a day that witnessed approximately $19 billion in positions eliminated throughout the cryptocurrency marketplace.
According to Bloomberg, Zhao characterized allegations attributing the market crash to Binance as "far-fetched."
"There are a larger group who claim the October 10th crash was caused by Binance and wants Binance to compensate everything," Zhao said, rejecting the accusations outright.
Zhao served as Binance's chief executive officer from the company's inception in 2017 through November 2023, when he resigned from the position following his guilty plea to federal charges in the United States concerning violations of anti-money laundering regulations. He subsequently completed a prison term related to the case before receiving a presidential pardon from US President Donald Trump in October of last year.
Consequently, during Friday's remarks, Zhao clarified he was communicating in his role as both a shareholder and user of Binance, rather than as an official spokesperson for the exchange.
Though he no longer holds the CEO position at Binance, Zhao continues to maintain an active presence within the cryptocurrency sector. He presently leads YZi Labs, a standalone investment firm that developed from what was previously Binance's venture capital division and oversees approximately $10 billion in total assets.
October crash caused a brief USDe depeg on Binance
The exchange found itself under intense examination throughout the Oct. 10 market turbulence, particularly after Ethena's USDe stablecoin experienced a significant depeg event specifically on the Binance platform.
Throughout the market downturn, USDe momentarily dropped from its intended $1 peg to approximately $0.65 on Binance, an occurrence that was subsequently explained as resulting from an internal oracle malfunction specific to the platform.
During that period, Guy Young, the founder of Ethena Labs, explained that the price deviation was confined to just one trading platform.
"The severe price discrepancy was isolated to one venue that referenced an oracle index from its own order book rather than the deepest liquidity pool," Young said. "The venue was also experiencing deposit and withdrawal issues during the event, which prevented market makers from closing the arbitrage loop."
In the aftermath of this incident, Binance provided compensation to impacted users totaling approximately $283 million.
Following the market-wide liquidation event, cryptocurrency valuations have encountered significant challenges in achieving recovery. Bitcoin (BTC), which was exchanging hands above $126,000 during early October, momentarily declined below the $80,000 threshold in November, fueling a wider cryptocurrency market downturn that eliminated more than $1 trillion in aggregate market capitalization compared to levels recorded in early October.