Binance Ltd., the largest cryptocurrency exchange by volume, has allocated $2 billion in funds to what Chief Executive Changpeng “CZ” Zhao calls an “industry recovery fund” that will be used to buy distressed crypto assets and support crypto projects in crisis.
Zhao first announced the recovery fund last week after the catastrophic collapse and bankruptcy of Sam Bankman-Fried’s crypto exchange FTX Trading Ltd. The downfall of FTX and its larger corporate structure, FTX Group, sent ripples throughout the larger crypto industry, which had already been suffering under depressed markets known as “crypto winter” triggered by previous events.
“To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis,” Zhao said at the time. “More details to come soon. In the meantime, please contact Binance Labs if you think you qualify.”
The IRI was initially announced Thursday and allocated $1 billion, according to a press release detailing its intent as “a new co-investment opportunity for organizations eager to support the future of Web3.” The expectation was that the allocation could be raised to $2 billion should the need arise.
Initial investors alongside Binance listed big names in the crypto industry and crypto-focused venture capital firms including Jump Crypto, Polygon Ventures, Aptos Labs, Animoca Brands, GSR, Kronos and Brooker Group. The investors pledged $50 million to the fund, which would be allocated in BUSD, Binance’s U.S. dollar-pegged stablecoin.
This morning, Zhao tweeted that Binance would add another $1 billion to the fund, raising the allocation to $2 billion.
Yesterday, #Binance allocated ANOTHER $1 billion to the industry recover initiative. All in BUSD.
— CZ 🔶 Binance (@cz_binance) November 25, 2022
According to the announcement, the fund has two focuses: seeking out and purchasing undervalued and distressed assets from companies, and supporting otherwise strong projects that have been put into bad positions by the collapse of FTX.
Crypto markets have already been suffering volatility and depressed values for the past 12 months, down significantly from all-time highs last November. Bitcoin, for instance, has fallen more than 75%. The crash TerraUSD/Luna, a USD-pegged stablecoin, in May deepened those issues. That caused a number of crypto lenders and market makers to end up with bad debts and liquidity issues, forcing them to suspend withdrawals and ultimately go bankrupt. Those companies included Three Arrows Capital, Holdnaut, Voyager Digital and Celsius Network.
Zhao also said Binance’s U.S. arm would be placing bids on Voyager Digital, after a deal with FTX fell through to buy the distressed crypto broker, he confirmed during an interview on Bloomberg TV.
In the wake of the liquidity crisis (and collapse) of FTX, Binance also pledged to publish a proof of reserves to show that it had the funds needed to cover all of its customers. The fruit of this labor was published today in a support document on the website using what is called a Merkle Tree that can be used to get deep data insight into Binance’s on-chain account data by anyone.
Shortly after the initial pledge announcement, Binance did release detailed information about its reserves, but that was just ledger information and lacked the cryptographic certainty of on-chain data. Currently the only token that can be verified in this way is bitcoin, though the support page says other coins and networks will be added in the coming weeks.