Binance Creates $1B Crypto Industry Fund After FTX Collapse

Binance co-founder and CEO Changpeng Zhao has given several interviews discussing the outlook for the cryptocurrency after weeks of market turmoil.

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On Thursday, cryptocurrency exchange Binance announced new details about an industry recovery fund aimed at supporting struggling players following the catastrophic collapse of FTX.

In a blogpost, Binance said it would allocate $1 billion in initial commitments to the recovery fund. The company added that it could increase this amount to $2 billion in the future “if necessary.”

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As Coinbase shares fall, Morgan Stanley lists major firms with potential FTX exposure.

It has also secured $50 million in commitments from crypto-native investment firms including Jump Crypto, Polygon Ventures and Animoca Brands.

Binance CEO Changpeng Zhao shared his public wallet address, indicating his initial commitment, saying, “We’re doing this transparently.” Public blockchain data reviewed by CNBC showed a balance of nearly $1 billion in Binance’s own BUSD stablecoin.

BUSD is a stablecoin issued by blockchain infrastructure firm Paxos and is approved and regulated by the New York State Department of Financial Services, according to Paxos’ website.

The fund is Binance’s attempt to keep the cryptocurrency industry afloat after controversial entrepreneur Sam Bankman-Fried’s exchange FTX filed for bankruptcy earlier this month.

Zhao has emerged as a new savior for the ailing industry, filling the void left by Bankman-Fried, which bought or invested in a number of beleaguered crypto firms from Voyager Digital to BlockFi before its collapse.

FTX’s failure was caused in part by a tweet from Binance’s CEO that drew attention to a CoinDesk report that raised questions about its accounting. Ever since FTX was swiftly shut down two weeks ago, investors have been worried about a possible cryptocurrency contagion affecting every corner of the industry.

At Tuesday’s first hearing in the bankruptcy filing, the company’s attorney lambasted FTX and its management, saying the company was being run like a “private citizen” of Bankman-Fried.

Binance said the facility is “not an investment fund” and is intended to support companies and projects “facing significant, short-term financial difficulties through no fault of their own.” Zhao previously said he intends to prevent future “cascade contagion effects” from the FTX collapse.

Binance said it expects the program to last about six months. It accepts requests from investors to invest additional funds.

Binance said it is “flexible in its investment structure” and accepts contributions in tokens, cash and debt. “We expect that individual situations will require tailored solutions,” the company said.

Binance said that about 150 companies have already applied for support from the fund.

Cryptocurrency markets did not react strongly to the news. In the last hour bitcoin rose about 0.2%, while ether traded flat for the session.

Trade volume is expected to decline in the US as Americans celebrate the Thanksgiving holiday.