Cryptocurrency Exchange

In staff letter, Binance CEO embraces scrutiny from regulators amid potential FTX deal

“People now think we are the biggest and will attack us more,” said Changpeng Zhao in a letter updating staff on the situation with FTX.

Changpeng Zhao, the chief executive officer of crypto exchange Binance also known as “CZ,” warned users its intention to acquire FTX may invite scrutiny from global regulators — but the firm is ready.

In a letter to Binance staff tweeted on Nov. 9, CZ said though the deal to acquire another major crypto exchange was still in the works, regulators would likely “scrutinize exchanges even more” and make it difficult to acquire operating licenses. He added that if the deal resulted in FTX going down, it would be a loss for the crypto industry and not a “win” for Binance.

“People now think we are the biggest and will attack us more,” said the Binance CEO. “We are used to being open and leaning into headwinds. In fact, we embrace scrutiny. We must significantly increase our transparency, proof-of-reserves, insurance funds, etc. A lot more to come in this area.”

CZ announced on Nov. 8 that FTX approached Binance for help in response to a “significant liquidity crunch,” resulting in the exchange signing a non-binding letter of intent to purchase FTX. The Binance CEO said at the time that the company was “assessing the situation in real time” and had the ability “to pull out from the deal at any time.”

FTX’s native token FTT has experienced significant price volatility following news of the potential deal, dropping from more than $19 on Nov. 8 to $4.71 at the time of publication. In his letter, CZ warned the Binance team not to buy and sell FTT, just as the exchange would keep its bag of tokens.

“We need to hold ourselves to a higher standard than even in banks,” said CZ. “As I have said many times over the years, ignore the prices. Let’s keep our heads down and focus on building products people use.”

Related: Binance CEO shares ‘two big lessons’ after FTX’s liquidity crunch

Despite CZ’s willingness to embrace scrutiny from regulators, it’s unclear if authorities intend to act to stop the deal from going through, as it would likely give Binance an overwhelming majority of the global crypto market. In a statement to Cointelegraph, a U.S. Commodity Futures Trading Commission spokesperson said the regulatory body was monitoring the situation.

Binance tops up SAFU fund at $1 billion amid price fluctuations

Binance CEO CZ took to Twitter to assure users that the crypto exchange’s insurance funds have been topped off at $1 billion as the debacle with FTX rages on.

As the liquidity crisis and acquisition of cryptocurrency exchange FTX continues, Binance CEO Changpeng “CZ” Zhao assured his community of insurance of sufficient funds backing the network. 

In a tweet on Nov. 9, CZ said that the exchange has once again topped its Secure Asset Fund for Users (SAFU) at $1 billion equivalent in light of “recent price fluctuations.”

The tweet included links to two reserve accounts, one of which holds both the Binance stablecoin (BUSD) and the native token of the network BNB (BNB) with an equivalent worth of $700 million. 

The other wallet revealed Bitcoin (BTC) holdings worth around $300 million.

Binance’s SAFU began in 2018 by allocating 10% of the trading fee into a fund that is solely dedicated to backing up user holdings in the case of an incident. In February of this year, the fund hit $1 billion for the first time.

The crypto community on Twitter responded to the tweet with mostly positive reactions, applauding CZ for his action. One user said, “all cryptocurrency firms should have a Secure Asset Fund for Users (SAFU) just like Binance.” 

While others had questions about the sufficiency of the cap for funds in the reserve:

These recent tweets regarding the balance of the SAFU, came after CZ pledged on Twitter the day before for a Proof-of-Reserve mechanism for a detailed disclosure of liquidity.

The Binance CEO said the exchange will deploy a Proof-of-Reserve system which will utilize Merkle Trees for “full transparency” with the community. Merkle Trees are a mechanism for encoding blockchain data in a more efficient and secure manner.

The most recent CZ tweets referring to Binance’s SAFU also ended with the one-word sentence: “transparency.”

Related: Binance’s FTX acquisition seen as chess move by crypto community

This is one of the latest moves in the back-and-forth between FTX and Binance, which has unfolded over the last few days.

CZ has been active within the community during the entirety of the events. On Nov. 8, he tweeted his major takeaways from what has transpired thus far, which included not using a native token as collateral within the same network and keeping a large reserve.

FTX founder Sam Bankman-Fried removes ‘assets are fine’ flood from Twitter

Sam Bankman-Fried has deleted a Twitter thread where he tried to assure customers that FTX and the assets on the platform were “fine.”

Sam Bankman-Fried, founder and CEO of the troubled cryptocurrency exchange FTX, appears to have retracted his words about the safety of client holdings on FTX.

Bankman-Fried has deleted a Twitter thread where he tried to assure customers that FTX and the assets on the platform were “fine.”

FTX CEO took to Twitter to post the thread of four different tweets on Nov. 7, claiming that FTX had “enough to cover all client holdings.” Bankman-Fried also stated that the firm didn’t invest client assets and has been processing all withdrawals and “will continue to be.”

“We have a long history of safeguarding client assets, and that remains true today,” one now-deleted tweet said.

The now-deleted flood of SBF, screenshot source: Crypto Slash

According to multiple sources on Twitter, FTX CEO removed his “assets are fine” thread on Nov. 8 at around 10:30 pm UTC, or a few hours after announcing a strategic transaction with Binance. As part of the deal, Binance agreed to acquire FTX in a move to help the troubled exchange overcome a “significant liquidity crunch.”

The acquisition news came shortly after several reports hinted that FTX had temporarily stopped withdrawals for the majority of coins. Many in the crypto community anticipated these events amid sluggish FTX withdrawals, concerns about the leaked balance sheet of FTX’s sister firm Alameda Research as well as Binance’s decision to liquidate its FTX Token (FTT) holdings.

The community has been outraged about SBF opting to delete the tweets, with many blaming the FTX founder for “blatant lies” about the status of assets on the exchange.

One Twitter user, Pledditor, also pointed out that SBF previously retweeted a random account that implied an airdrop for those who don’t withdraw their coins from FTX. The crypto enthusiast suggested that the United States Securities and Exchange Commission needs to go after such actions, stating: “An implicit promise that SBF doesn’t actually to be held accountable for because he himself did not tweet it.”

Related: Saying ‘not financial advice’ won’t keep you out of jail — Crypto lawyers

Some crypto observers aren’t too optimistic about the future events for FTX users that continue to store their holdings on the exchange. According to Dylan LeClair, senior analyst at UTXO Management, FTX customers are now unsecured creditors.

The FTX news triggered another massive crash on the crypto market that has already been already on the decline this year, with Bitcoin (BTC) tanking to below $18,000. The total market value lost about 10% over the past 24 hours at the time of writing, according to CoinGecko.

Coinbase and Kraken experience limited services amid markets turbulence

They are reportedly facing latency issues due to the high level of new user sign-ups and transfers to the platform.

Both Coinbase’s and Kraken’s platforms were down or experiencing intermittent latency issues on Nov. 8 amid market turbulence, according to users’ complaints on Twitter. The news followed the day’s earlier revelation that crypto exchange Binance intends to acquire its rival FTX.

According to Twitter users, services were limited on both exchanges, with issues related to connectivity to the platforms and unconfirmed rumors of halted withdrawals.

On its support profile, Coinbase said it was “experiencing network connection issues for Coinbase.com, Coinbase Pro, and Coinbase Prime. This could result in difficulty signing in. If you’re already signed in you may experience slow loading across web and the mobile app.” The exchange claimed that the issue was related to the high level of new user sign-ups and transfers to the platform on Nov. 8.

Kraken did not comment on the issues via its public channels but highlighted that it uses proof-of-reserves audits, enabling clients to verify balances held on the exchanges and its backed assets as well. 

Kraken said in an update posted to its status page late on Nov. 8 that it had resolved the connectivity issues after a fix was implemented, but did not state what caused the problem.

With proof-of-reserves, an independent audit is conducted by a third party to check a custodian’s assets are held as claimed.

The market turbulence was triggered by FTX founder and CEO Sam Bankman-Fried’s Nov. 8 announcement of an “agreement on a strategic transaction” with Binance, which aims to acquire FTX after its decision to liquidate 23 million FTX Token (FTT), triggering a liquidity crisis at FTX. Some have compared the deal to a “chess move,” insinuating that Binance intentionally and strategically acted in a way that led to the deal.

The series of tweets triggered a sell-off of FTX Token that resulted in its price breaking below its support. The sell-off continued, and the token is down over 76% in the past 24 hours, trading at $5.09 as of publication time.

Hours after the deal, Binance CEO Changpeng Zhao also noted on Twitter that the exchange would start using proof-of-reserves soon, adding that “banks run on fractional reserves. Crypto exchanges should not.”

Update (Nov. 9, 5:00 AM UTC): Added an update that Kraken resolved the connectivity issues facing users.

Binance’s FTX acquisition seen as chess move by crypto community

Binance’s decision to liquidate 23 million FTT tokens triggered FTX’s liquidity crisis.

“Who needs Netflix when you are in crypto?” commented a user on Twitter as the crypto industry attempted to digest the acquisition of cryptocurrency exchange FTX by its rival Binance. The deal, disclosed on Nov 8., has been compared to a “chess move” by some, insinuating that Binance’s strategy intentionally led to the deal.

Users on Twitter claimed that “CZ just executed the most gangster play we’ve seen in Crypto, ever, period,” referencing the series of tweets from Binance CEO Changpeng Zhao that triggered the acquisition.

The community also compared the move with Elon’s Musk Twitter acquisition:

For a brief recap, in a Nov. 6 tweet, Zhao announced the decision to liquidate Binance’s position on FTX token (FTT) was made after “recent revelations that have came to light,” citing “post-exit risk management” reasons. 

FTX founder and CEO Sam “SBF” Bankman-Fried took to Twitter on Nov. 7 to claim that a competitor was trying to go after the cryptocurrency exchange with false rumors. FTX “assets are fine,” he said, stating that it had enough funds to cover all client holdings and does not invest client assets, even in treasuries. In the same thread, SBF also called for collaboration with rival exchange Binance.

As reported by Cointelegraph, the series of tweets triggered a sell-off of FTX Token that broke below the pattern’s support line near $22.50, accompanied by a volume spike. The sell-off continued below the support line, and the token is down over 57% in the past 24 hours, negotiated at $9.70 as of publication.

In a message to FTX’s staff this morning, SBF said that $6 billion of net had been withdrawn from the platform in the past 72 hours, leading the exchange to “effectively pause,” adding that the situation would be resolved in “the near future,” according to reports.

On Nov. 8, both SBF and CZ announced the acquisition, citing a “liquidity crunch,” implying that Binance’s equity liquidation led to FTX’s insolvency. FTX’s CEO chose to seek a “bailout from the competitor that triggered the bank run in the first place,” wrote a user on Twitter regarding the legal options the exchange had during the liquidity crisis.

The deal still depends on regulatory approval, and it is unclear whether antitrust concerns would arise from the deal.

Binance signed a non-binding letter of intention declaring its intention to buy FTX. Zhao added that Binance was “assessing the situation in real time” and had the ability “to pull out from the deal at any time.”

Germany’s financial regulator orders Coinbase to address ‘business organization’ practices

In effect since Oct. 27, BaFin’s order referred to Coinbase’s Germany arm outsourcing some operations “essential for conducting banking business or providing financial services.”

The Federal Financial Supervisory Authority of Germany, also known as BaFin, has issued an order related to the business organization of Coinbase’s local arm in accordance with the country’s banking laws.

In a Nov. 8 notice, BaFin said it had issued the order to Coinbase Germany GmbH for violations of “proper business organization” under the German Banking Act. According to a copy of the legislation made available by the United States Commodity Futures Trading Commission, Coinbase’s Germany arm should have “suitable arrangements for managing, monitoring and controlling risks and appropriate arrangements by means of which the institution’s financial situation can be gauged with sufficient accuracy at all times” and provide certificates of audit related to appropriate reports on its annual accounts.

BaFin referred to Coinbase’s Germany arm outsourcing some of its operations as “essential for conducting banking business or providing financial services.” The order has been in effect since Oct. 27.

“An audit of the annual financial statements revealed organizational deficiencies at the institute,” said BaFin. “The regularity of the business organization was not given in all audited areas.”

In a written statement to Cointelegraph, a Coinbase spokesperson said the exchange was “cooperating fully” in its efforts to address the findings of the annual audit report:

“Coinbase considers regulation a business enabler and the process to undertake the measures identified by BaFin has already begun. We have developed a remediation plan fully addressing each finding of the audit report to address BaFin’s concerns. To date, we have made substantial progress on this plan.”

Related: German BaFin official calls for ‘innovative’ EU-wide DeFi regulation

Germany’s financial watchdog first issued Coinbase’s local arm a license allowing the exchange to custody digital assets in the country in July 2021. The move followed German lawmakers passing legislation requiring firms aiming to provide crypto services to receive BaFin approval starting in January 2020.

Breaking: Binance CEO announces intent to acquire FTX to ‘help cover the liquidity crunch’

FTX CEO Sam Bankman-Fried called the news a “user-centric development that benefits the entire industry.”

Following Binance CEO Changpeng Zhao’s announcement that the company would liquidate its position in FTX Token (FTT), FTX CEO Sam Bankman-Fried, also known as ‘SBF,’ took to social media seemingly in an effort to quell rumors of conflict between the major crypto exchanges.

According to a Nov. 8 Twitter thread from Bankman-Fried, FTX has “come to an agreement on a strategic transaction” with Binance following attempts to clear out its withdrawal backlog. SBF said he had asked Binance to step in, aiming to “clear out liquidity crunches” and cover assets on a 1:1 basis.

“I know that there have been rumors in media of conflict between our two exchanges, however Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators,” said SBF. “We are in the best of hands.”

Zhao issued his own statement on Twitter, saying FTX approached Binance for help on Nov. 8 in response to a “significant liquidity crunch.” According to the Binance CEO, the transaction to which SBF referred was a non-binding letter of intent for the major exchange to acquire FTX. Zhao added that Binance was “assessing the situation in real time” and had the ability “to pull out from the deal at any time.”

The announcement of the tentative deal between two major exchanges came just one day after SBF claimed on Twitter that FTX and its assets were “fine” and dismissed reports of liquidity issues as “false rumors.” The FTX CEO also called on CZ to have the exchanges work together “for the ecosystem,” but some of the Binance CEO’s social media responses suggested he may not have been supportive of the deal — Zhao hinted Binance would “stay in the free market” as opposed to having Alameda Research purchase the exchange’s FTT holdings.

Related: FTX Token price risks 30% plunge as a 23M FTT ‘part’ moves to Binance

Should the deal between FTX and Binance move forward, it would potentially represent a landmark acquisition in the crypto space, rivaling reports Coinbase planned to purchase BtcTurk for $3.2 billion. FTX has often been the one scooping up businesses associated with digital assets, aiming to purchase Bitvo as part of its move into Canadian market and reportedly raising $1 billion to explore additional acquisitions.

SBF calls for collaboration with Binance ‘for the ecosystem’

FTX’s founder denied that there were liquidity issues with the exchange’s FTT token and claimed to be the victim of false rumors.

FTX founder and CEO Sam Bankman-Fried took to Twitter again on Nov. 7 to claim that “a competitor is trying to go after the cryptocurrency exchange with false rumors” while also calling for collaboration with rival exchange Binance.

The comments followed a statement from Binance CEO Changpeng “CZ” Zhao concerning the liquidation of the exchange’s position in FTX Token (FTT) as “post-exit risk management” over the weekend.

FTX “assets are fine,” according to SBF, who also alleged that the exchange has enough funds to cover all clients’ holdings and does not invest client assets, even in treasuries. He also said:

“It’s [FTX] heavily regulated, even when that slows us down. We have GAAP audits, with > $1b excess cash. We have a long history of safeguarding client assets, and that remains true today.”

Binance co-founder and chief customer service officer Yi He clarified that the sell-off of FTT had nothing to do with the alleged “war” between the two exchanges.

Earlier on Nov. 7, FTX’s Twitter account also addressed user complaints surrounding withdrawal delays, assuring users that everything is running smoothly with the matching engine, although node throughput remains limited for Bitcoin (BTC) withdrawals at the time of publication.

On Reddit, some users expressed alarm regardin the developments, likening the situation to Celsius halting withdrawals and misleading its users prior to the platform’s collapse.

In a Nov. 6 tweet, Zhao said the decision to liquidate the assets was made after “recent revelations that have came to light,” in reference to Terra’s Luna Classic (LUNC) crash and its impact on the crypto market. He also commented on the FTX founder’s recent actions. In a tweet, CZ added:

“We won’t support people who lobby against other industry players behind their backs.”

On-chain analysis shows that an unknown wallet transferred approximately 23 million FTT to Binance — worth around $584 million — on Nov. 7. According to Zhao, the transfer was part of the exchange’s decision to offload tokens.

Related: FTX addresses user withdrawal complaints amid major token movement

The series of tweets triggered a sell-off of FTX Token that broke below the pattern’s support line near $22.50, accompanied by a volume spike. The sell-off continued on Nov. 7 below the support line, raising risks of a bearish continuation in the coming months, as reported by Cointelegraph.

Binance’s decision was influenced by allegations that the FTX-founded crypto hedge fund Alameda Research could go insolvent due to its exposure to illiquid altcoins, including FTT. As of June 30, Alameda Research reported a balance sheet of $14.66 billion, with FTT the largest holding company with $5.8 billion, making up 88% of its net equity.

FTX addresses user withdrawal complaints amid major token movement

The exchange assured users in a series of Tweets that withdrawals should be moving along and matching engines are running as they should, though some users didn’t buy it.

Cryptocurrency exchange FTX took to Twitter to address user complaints surrounding sluggish withdrawals. FTX assured users that everything is running smoothly with the matching engine, although node throughput is limited for Bitcoin (BTC) withdrawals.

In the series of tweets, the exchange also addressed stablecoin withdrawals, saying redemptions or creations might be slow until banks open for the week and wires clear.

Meanwhile, the community on Twitter had mixed reactions regarding FTX’s response. Some users tweeted their support of the exchange while others expressed their skepticism:

Users on Reddit also expressed alarm toward the developments likening the situation to Celsius halting withdrawals and misleading its users prior to the platform’s collapse.

These issues come as the exchange faces major liquidations of its native FTX token (FTT) as a result of an unspoken feud with rival exchange and blockchain developer Binance.

Changpeng “CZ” Zhao, the CEO of Binance, said the company will liquidate the entirety of its holdings of FTT. In a tweet on Nov. 6, the CZ said the move came as a result of, “recent revelations that have came to light.”

Follow-up tweets by CZ called the move a type of risk management with lessons taken from the Terra collapse earlier this year. He also commented on the recent actions of FTX founder and CEO Sam Bankman-Fried, who allegedly lobbied against centralized finance. In a tweet from CZ, he added:

“We won’t support people who lobby against other industry players behind their backs.”

According to on-chain analysis, around 23 million FTT, or $520 million at the time of writing, was transferred to Binance from an unknown wallet.

Related: FTX exec revealed as big donor to Oregon Democrats following misidentification

Bankman-Fried also tweeted his own response to the situation, in which he emphasized it being the time to build up the space. Also saying he respected the work of many in the industry, including CZ.

In light of the liquidations and community buzz, market analysts speculate that FTT could face serious price plunges. At the time of writing, the price hovers around $22.60.

Deribit crypto exchange halts withdrawals amid $28M hot wallet hack

Crypto exchange Deribit halted withdrawals following a hot wallet hack where hackers got away with $28 million in stolen funds.

Major cryptocurrency derivatives exchange​​ Deribit has halted withdrawals after suffering a $28 million hot wallet hack.

Deribit exchange got its hot wallet compromised before midnight UTC on Nov. 1, the firm reported on Twitter.

The exchange emphasized that client funds are safe as losses are covered by Deribit’s reserves, stating:

“Client assets, Fireblocks or any of the cold storage addresses are not affected. It’s company procedure to keep 99% of our user funds in cold storage to limit the impact of these type of events.”

As part of the ongoing security checks, Deribit had to halt withdrawals, including custodians Copper Clearloop and Cobo, until the exchange is 100% confident about security following the hack. “Deposits already sent will still be processed, and after the required number of confirmations, they will be credited to accounts,” the firm added.

According to the information on Deribit’s Telegram chat, trading on Deribit is operating as usual. “Due to our hotwallet policy we were able to limit loss of user funds,” a Deribit support person noted.

Deribit’s insurance fund will not be affected by the hack, as the exchange will pay the loss for it as well. “Deribit remains in a financially sound position and ongoing operations will not be impacted,” the statement notes.

A spokesperson for Deribit told Cointelegraph that the company is aiming to resume withdrawals as soon as possible and is now checking “all security measures.” The platform is also working on a full incident review at the moment to provide more details about the vulnerability that could have caused the issue, the person added.

The hack was the first time for Deribit to experience such an attack and losses since the company’s launch, the representative said.

Founded in 2016, Deribit is one of the largest crypto derivatives exchanges in the world, allowing users to trade crypto futures and options. At the time of writing, Deribit’s daily trading volume amounts to $280 million, according to data from CoinGecko.

Related: Scary stats: $3B stolen in 2022 as of ‘Hacktober,’ doubling 2021

At the time of writing, some of Deribit’s website sections also appear to be nonoperating. Deribit Insights, the firm’s crypto data hub, is not available at the time of writing, showing a “critical error on this website.” In the meantime, Deribit’s trading website is intact. According to a Deribit representative, the website issue and the hack are not related.