Binance, the world’s largest cryptocurrency exchange led by billionaire Changpeng Zhao, is pledging up to $2 billion to help shore up crypto companies facing financial hardship following the bankruptcy of rival exchange FTX.
In a statement released on Thursday, Binance said it will establish a $1 billion recovery fund with plans to increase the amount to $2 billion in the near future “as the need arises.” The exchange operator has received a total of about $50 million in an initial pledge from seven investment firms, including Hong Kong-based Animoca Brands and Jump Crypto, the digital asset arm of trading store Jump Trading with based in Chicago.
Its bailout comes as former billionaire Sam Bankman-Fried’s FTX is going through bankruptcy proceedings, which has put a growing number of crypto firms that have had exposure to the trading platform and its assets on the brink of collapse. related. Among the companies are Genesis Global Capital, the cryptocurrency lending subsidiary of US billionaire Barry Silbert’s Digital Currency Group, as well as Blockfi, the cryptocurrency lender that had received credit lines from FTX.
Binance said it is seeking to support companies and projects that, “through no fault of their own, are facing significant short-term financial hardship.” The initiative, which will last around six months, could involve instruments such as crypto tokens, fiat currencies, equity, debt or credit lines. So far it has received 150 applications from companies looking for help.
The implosion of the Bankman-Fried crypto empire was triggered by a tweet posted by Binance co-founder and CEO Zhao announcing a planned sale of FTX crypto tokens. The tweet drew attention to a report by Coindesk that raised concerns about FTX’s financial health. FTX has since seen a bank run and plunged into a cash crunch as Binance abandoned its deal to bail out the cryptocurrency exchange, citing due diligence, “breaking reports regarding mismanaged client funds and alleged investigations by the US agency”.
Last week, the UK Treasury Parliamentary Committee asked Binance to explain the circumstances surrounding Zhao’s tweets and whether the company understood the potential consequences it could have, according to Bloomberg. Lawmakers, however, allegedly claimed that the evidence presented by Binance was disappointing and unacceptable.