CZ Denies Accusations of Binance Causing $19 Billion Crypto Liquidations

Changpeng Zhao, commonly known as CZ, has firmly rejected claims that Binance was a key factor in the largest liquidation event in cryptocurrency history, which saw approximately $19 billion wiped out in leveraged positions last October.

Key Takeaways

CZ denied accusations that Binance was responsible for the $19 billion liquidation on October 10.
He clarified that his statements were made in his capacity as a shareholder, not as a Binance executive.
An internal oracle issue on Binance was later linked to a brief depeg of the USDe stablecoin.

Zhao addressed these claims during a question-and-answer session on Binance’s social media platforms, countering the notion that the exchange triggered the market downturn on October 10.

As reported by Bloomberg, Zhao referred to the accusations as “far-fetched” and stated that some traders were misplacing blame on Binance for their losses during the market crash.

CZ Denies Accusations of Binance Causing $19 Billion Crypto Liquidations

CZ Refutes Claims of Binance's Role in October 10 Market Crash

Zhao articulated, “There are a larger group who claim the October 10th crash was caused by Binance and wants Binance to compensate everything,” firmly disputing that the exchange was at the origin of the liquidation chain reaction.

He emphasized that he was speaking as a shareholder and user, not in his former role as CEO.

Zhao left his position as chief executive of Binance in November 2023 after admitting guilt to U.S. federal charges regarding anti-money laundering violations. He completed a prison sentence but was subsequently pardoned by former U.S. President Donald Trump in October last year.

Although he is no longer managing the exchange, Zhao continues to be influential in the industry and now leads YZi Labs, an investment firm that has evolved from Binance's previous venture arm, currently overseeing around $10 billion in assets.

During the October market turmoil, Binance attracted scrutiny when Ethena’s USDe stablecoin briefly lost its dollar peg on the platform. The USDe price fell to about $0.65 on Binance before regaining value, a situation later attributed to a specific oracle issue related to the platform rather than a general failure of the stablecoin.

Ethena founder Guy Young explained that the price discrepancy was limited to one trading venue that used its own order book instead of larger liquidity pools. He noted that temporary issues with deposits and withdrawals hampered arbitrage traders from correcting the price difference. Binance later compensated affected users with around $283 million.

$1 Trillion Crypto Market Decline Fuels Ongoing Discussions about Leverage and Risk

As the months pass, the repercussions of this event continue to resonate throughout the market. Bitcoin, which was valued over $126,000 in early October, plummeted to below $80,000 a few weeks later, pulling the overall market down with it.

This correction erased more than $1 trillion from the entire crypto market, reigniting discussions about leverage, risk management, and the responsibilities of major exchanges when facing extreme market volatility.

Analyst Samer Hasn from XS.com noted that the Federal Reserve's current neutral to hawkish stance, alongside tensions in the Middle East, has diminished the appetite for speculative investments in the cryptocurrency realm.

Meanwhile, Bitwise Chief Investment Officer Matt Hougan observed that gold surpassing $5,000 per ounce and rising uncertainty surrounding U.S. cryptocurrency regulations are pivotal factors influencing the current landscape for digital assets.