Changpeng Zhao has again rejected the claim that Binance’s decision to sell its FTT token holdings caused FTX’s collapse, arguing that the exchange failed because it could not meet withdrawal demands after customer funds had been misused.
In a Sept. 25 podcast appearance, the Binance founder said his Nov. 6, 2022 social-media post announcing that Binance would liquidate its remaining FTT position was a response to growing concerns about FTX and its affiliated trading firm, Alameda Research. He said the post did not create the underlying financial weakness that brought down Sam Bankman-Fried’s companies days later.
“Withdrawals accelerated” once the market began questioning FTX’s solvency, Zhao said, exposing a liquidity shortage at the exchange. FTX filed for Chapter 11 bankruptcy protection on Nov. 11, 2022, after customers sought to withdraw billions of dollars in a matter of days.
Court proceedings against Bankman-Fried later established that FTX customer deposits had been diverted to support Alameda Research, political donations, venture investments and other spending. In March 2024, a U.S. federal judge sentenced Bankman-Fried to 25 years in prison for fraud and related offenses.
The FTT sale followed concerns over Alameda’s balance sheet
Zhao’s comments return to one of the most disputed moments in the FTX crisis. On Nov. 6, 2022, he said Binance would sell its remaining FTT holdings “due to recent revelations,” referring to reporting on Alameda Research’s balance sheet and its large exposure to FTT, a token issued by FTX.
Binance had received about $2.1 billion in cash equivalents, including BUSD and FTT, after exiting an earlier equity investment in FTX, Zhao said at the time. The company said it planned to sell the FTT gradually to reduce market disruption.
The announcement intensified pressure on FTT and prompted public questions about whether FTX had sufficient liquid assets to process withdrawals. FTX’s collapse followed within days, but Zhao argued that a solvent exchange would have been able to handle withdrawals without failing.
That distinction remains central to the episode. A large token sale or public warning can trigger a bank-run-like rush for exits, particularly when a platform’s liabilities are opaque. Yet the subsequent criminal case against Bankman-Fried and the findings from FTX’s bankruptcy process placed the core failure inside FTX’s own handling of customer assets.
Zhao recalls Binance’s rapid early expansion
Zhao also used the podcast to describe Binance’s origin story, saying the exchange began taking shape in May 2017 with a group of roughly 15 to 20 people who had been working on trading systems at a company called BJ Tech.
The team chose the Binance name during an early meeting, he said, then began filling gaps outside its technical expertise, including marketing and customer support. Zhao said the group had to build those functions while launching an exchange into a fast-moving market dominated by established platforms.
Binance reached the leading position among cryptocurrency exchanges within roughly six months, Zhao said. He credited fast internal coordination and execution, while drawing a contrast between management practices he associated with Western corporate workplaces and the more Asia-influenced operating style used by his team.
The speed of Binance’s rise became a defining feature of the 2017 bull market. Crypto trading platforms could expand rapidly as new token listings attracted users, liquidity and trading activity, though that model also created substantial risks around governance, compliance and market oversight.
Token markets expose retail traders to startup risk
On token performance, Zhao said failure is common among early-stage ventures and compared crypto with earlier technology booms. During the internet era, he said, millions of companies emerged while only a fraction developed into durable businesses.
Public token markets make that process unusually visible. Retail traders can buy into projects at an early stage and suffer losses when products fail, founders abandon development or token economics prove unsustainable. In older technology cycles, many comparable losses were concentrated among venture funds, private shareholders and institutional backers before companies reached public markets.
Zhao said debates over paid market-making arrangements and exchange launch programs should focus on founder conduct, user education and disclosure. Market makers provide buy and sell orders intended to support trading liquidity, but undisclosed compensation, token allocations or related-party arrangements can create conflicts that users may struggle to assess.
He argued that crypto disclosure standards remain less developed than those governing public equities in many jurisdictions. Regulatory scrutiny has increasingly focused on those gaps, particularly after the failures of FTX, Celsius Network, Voyager Digital and other firms that held customer assets or issued widely traded tokens.
Prison sentence and compliance pressures
Zhao also discussed his four-month prison sentence, describing concern that prosecutors could add charges while his case was pending. In April 2024, he was sentenced after pleading guilty to violating the Bank Secrecy Act by failing to maintain an effective anti-money-laundering program at Binance.
The U.S. Department of Justice announced in November 2023 that Binance agreed to pay more than $4.3 billion in penalties and forfeiture under its settlement with U.S. authorities. Zhao stepped down as chief executive as part of the resolution and paid a $50 million criminal fine.
His case has become a reference point for exchange operators navigating the post-FTX regulatory environment. Compliance systems once treated as secondary operational costs now determine whether platforms can retain banking relationships, serve customers in major markets and avoid enforcement actions that threaten their ability to operate.
Zhao also revisited the “4” meme associated with his social-media posts. He said it originated in a 2023 message listing education, regulatory compliance and product development as priorities, followed by a fourth point urging users to ignore fear, uncertainty and doubt. The phrase later became a recurring piece of Binance community culture, with Zhao saying roughly 1,000 related memes had circulated within two years.
Want deeper context on centralized exchanges and safety? Explore CEX vs DEX to better understand platform risks.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
