According to CZ, Binance is developing a recovery fund to assist projects with liquidity issues.
Co-investors within the sphere are free to participate in fundraising.
Zhao believes the recovery funds can help de-escalate the overall crypto crisis.
Tron founder Justin Sun pledged the support of Tron, Huobi Global, and Poloniex shortly after the announcement.
FTX’s problem could be traced to Alameda Research’s leaked balance sheet showing billions of dollars of its assets in FTT.
Amidst the crisis rocking FTX, a popular crypto exchange, Binance is developing a recovery fund project to assist projects enduring liquidity issues.
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. More details to come soon. In the meantime, please contact Binance Labs if you think you qualify. 1/2
— CZ Binance (@cz_binance) November 14, 2022
According to the announcement by its CEO, Changpeng Zhao (CZ), co-investors within the sphere are free to participate in the raising of funds.
“Crypto is not going away. We are still here. Let's rebuild,” Zhao said.
Zhao believes the recovery funds can help deescalate the overall effects of the FTX crisis on the crypto sphere. However, the CEO has yet to explain the standards to select projects that will qualify for the funding. But he urged developers who may fit into the standards to reach out to Binance Labs, the exchange’s venture capital arm.
Further, Zhao clarified that the struggling FTX would not benefit from the funding project. According to him, only projects that are not fraudulent qualify as strong projects.
“Liars or fraud never qualify as strong projects,” CZ clarified.
Shortly after the announcement, Tron founder Justin Sun pledged the support of Tron, Huobi Global, and Poloniex to the project. Sun hinted at the importance of uniting and building together in the face of the crisis rocking the industry. Similarly, Huobi, in a separate statement, confirmed its support for the Binance recovery fund project.
Crisis Rocking the Crypto Sphere
The issue befalling FTX can be traced to a leaked balanced sheet showing that Alameda Research, a company founded by Sam Bankman-Fried, held billions of dollars of its assets in FTT.
As a reaction to this report, Binance started liquidating its FTT holdings, which triggered massive withdrawals of assets from the exchange. This plunged the FTT token to around a 75% low.
In a late attempt to redress the situation, Zhao moved to purchase the assets of FTX.
In the end, Binance could not achieve the deal due to FTX issues beyond its control. Later, FTX, through its CEO, Bankman-Fried, has filed for bankruptcy, joining the likes of Celsius, Hodlnaut, and a host of others enduring liquidation turmoil.
On the Flipside
With the recent pledge to help crypto firms with liquidity, Justin Sun, founder of Tron network, also pledged to deploy billions to help FTX.
Why You Should Care
FTX’s recent collapse has ravaged the crypto arena, leaving many firms without healthy liquidity and posing a threat to the entire sector. However, Binance’s recent move, along with that of other industry giants, is crucial to controlling the negative impact the FTX issue is having on the industry.