Crypto Crisis Alert: Binance & FTX

Martin Walker
Sep 9, 2023 at 01:12 pm

A hedge fund manager, whose company suffered significant setbacks during FTX's tumultuous November collapse, is now sounding the alarm about a potential impending "crisis" at Binance.

On Tuesday, Travis Kling, the founder of Ikigai Asset Management, released a comprehensive timeline chronicling a series of "adverse occurrences" at Binance since December 2022, drawing the attention of some of the exchange's top executives.

Drawing Parallels Between Binance and FTX

Kling's timeline highlights more than 40 events that have raised doubts about the reliability of Binance over the past year. These include Binance's withdrawal from certain jurisdictions like Canada, substantial workforce reductions, and facing legal actions from prominent regulatory authorities in the United States.

During a recent interview with The Delphi Podcast on Thursday, Kling expressed suspicions that Binance might be experiencing a situation reminiscent of FTX, characterized by an imbalance between assets and liabilities – a scenario where the exchange lacks sufficient assets to cover a surge in customer withdrawal requests. He pointed out that Binance's alleged failure to segregate customer assets could exacerbate the risk of a similar collapse.

He questioned, "Could there be more BNB than what's needed to meet obligations? If it turns out that they've been acquiring BNB to artificially bolster its price, preventing a collapse and covering up a shortfall by dipping into customer deposits, it could very well be a repeat of the FTX scenario, but this time in the form of 'FTX 2.0.'"

When asked about why Binance hasn't succumbed to its turbulent environment, Kling speculated on two potential explanations: the utilization of Binance CEO Changpeng Zhao's substantial personal wealth to support the company and the high level of trust he enjoys among Asian investors.

Response from Binance Executives

One concerning aspect surrounding Binance has been the sudden departures of several top executives this year, with the most recent being Mayur Kamat, the former head of product, resigning from his position.

However, Patrick Hillman, a former Binance executive who left the company earlier, came to Binance's defense in response to Kling's assertions. Hillman argued on Wednesday that "Binance has not faced a collapse because it commands the largest market share in the world's most critical cryptocurrency markets."

Although not a direct response, Changpeng Zhao took to X (formerly known as Twitter) on Thursday to address concerns regarding "negative news and rumors" surrounding Binance. Instead, he highlighted several positive developments for the company in the current year.

He stated, "We've also achieved victories in court cases, effectively managed a bank run, recorded a significant increase in deposits, established new fiat channels, smoothly phased out old products while launching new ones, expanded our team, and entered new markets."

Zhao further reassured the community, saying, "All withdrawals (and deposits) are being managed correctly. All customer funds are securely protected (SAFU), and we maintain a 100% reserve."

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