YEREVAN (CoinChapter.com) — The US Department of Justice (DOJ) has blamed Binance for causing a liquidity crisis at rival cryptocurrency exchange FTX. At least, that is what some reports circulating on social media channels will want you to believe.
While the idea is tempting and quite believable, it is nothing but a rumor. The DOJ may very well do that in the coming weeks. However, it hasn’t accused Changpeng Zhao (CZ) of tanking Sam Bankman-Fried’s business yet.
How Did the Rumor Start?
An account on X (Twitter), masquerading as the popular crypto media platform Watcher Guru, started the fake news. The imposter page made a post on its handle, which many mistook to be coming from the real account.
Ever heard of the quote, “A lie can travel halfway around the world while the truth is putting on its shoes.“? Well, that is exactly what happened here.
Before you knew it, hundreds of people had shared the tweet. Other people copy-pasted the same text on their accounts, causing it to reach a wider audience.
Even though some people pointed out that it was fake news, the rumor did not subside. Several gullible people continue to fall for it, warranting a fact check from us.
For the uninitiated, Binance CEO Changpeng Zhao recently entered a settlement deal with the US Department of Justice (DOJ). Law enforcement authorities had accused him of breaking Anti-Money Laundering (AML) laws.
As part of the deal, Binance has agreed to pay $4.3 billion to the DOJ. Moreover, Zhao stepped down as the CEO of the crypto firm.
Did Binance Cause Liquidity Crisis at FTX?
The fact that Zhao and Binance faced several allegations of plotting to destroy FTX is no news. The accusations stem from his tweet from Nov. 6, 2022.
In his now famous post, CZ announced that his firm was liquidating its holdings of FTX Token (FTT) “due to recent revelations that have come to light.”
The then-Binance chief was referring to the CoinDesk report two days prior. The investigative piece revealed Alameda Research, Bankman-Fried’s trading firm, was engaging in risky financial practices.
It also showed that a large portion of the firm’s portfolio was in FTT tokens. This meant SBF had given Alameda an unfair trading advantage. Even more scary was the fact that the report cast doubt on FTX’s liquidity and solvency.
After CZ’s tweet, several investors and traders began pulling their funds out of the exchange. It soon became clear that FTX did not have sufficient liquid assets to fulfill these requests, leading to a liquidity crisis.
Since then, Sam Bankman-Fried and his friend have repeatedly blamed Zhao for FTX’s collapse. The issue came up during SBF’s trial as well.
Caroline Ellison, Bankman-Fried’s former girlfriend who led Alameda Research, alleged the tweet “contributed to” the FTX collapse.
When Kevin O’Leary Said Binance Killed FTX
Canadian businessman and popular Shark Tank investor Kevin O’Leary once played as a spokesperson for FTX. He was one of the most well-known faces that invested in the defunct crypto exchange.
After its collapse and Bankman-Fried’s arrest, the self-styled Mr. Wonderful was called to testify at the US Congress.
In his testimony, he claimed Binance “intentionally” put its rival out of business. He further pushed for regulations on CZ’s firm.
“Binance is a massive unregulated global monopoly now. They put FTX out of business,”
he said.
The latest tweet claiming the US Department of Justice (DOJ) has blamed Binance for causing a liquidity crisis at rival cryptocurrency exchange FTX is fake. However, that does not mean such sentiments don’t exist in the industry.