The trouble started on Sunday, when Binance’s CEO, Changpeng Zhao, announced he would sell the crypto exchange’s holdings of FTT, the native token of Sam Bankman-Fried’s crypto exchange, FTX. Bloomberg reported that Binance holds 23 million FTT coins, worth $415 million.

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Zhao’s announcement may have sparked a bank run on FTX. Onchain data shows that users withdrew $925 million from FTX over the past week, almost the equivalent of the exchange’s revenue last year. 

On-chain data from Santiment showed that crypto exchange FTX lost 290,000 Ethereum ($430 million) from its main wallet between Saturday and Monday. The number of ETH in FTX’s main wallet fell from 322,000 to 32,000. “At one point, the wallet was bleeding 500 ETH per minute,” tweeted Santiment.

A Monday report from on-chain data provider Crypto Quant found that FTX’s stablecoin reserves have declined by 93% in the last two weeks. Alameda Research, FTX’s sister company, sent FTX millions of dollars worth of USDC to fix the liquidity crisis. 

On Tuesday morning, FTT fell to lows of $15.59, down from $25 on Saturday. At press time, it trades for $17.40. Solana’s token, SOL, which features heavily on Alameda’s balance sheet, fell 15% in the past 24 hours. There’s speculation that Alameda is selling its SOL holdings to buy FTT tokens and send them to FTX. 

Amid the selloff, Magic Internet Money (MIM) stablecoin slightly lost its peg to the US dollar, hitting a low of $0.95, due to concerns that MIM is heavily backed by FTT, which accounts for 18% of the total collateral of the stablecoin’s supply. 

Open interest in FTT more than doubled, suggesting that traders are looking for a way to hedge their FTT holdings amid the crisis. The funding rate of FTT also declined sharply, from -8% to -36%, indicating that traders are shorting FTT. 

Zhao denied orchestrating the events. “Funny memes, media & some people tried to color this as a ‘fight.’ Sorry to disappoint, but I spend my energy building, not fighting. Today I spent my day on our business & our community. I suggest others do the same,” he said in a tweet.

Bankman-Fried, however, hinted that Zhao is to blame. “A competitor is trying to go after us with false rumors,” he tweeted. He urged the competitor to “work together for the ecosystem.”

Sam Bankman-Fried tried to reassure his customers. He dismissed bankruptcy fears as “a bunch of unfounded rumors” and said customer funds were safe. He said that the exchange had processed all withdrawals, despite rumors that funds had gotten stuck.


Samyuktha Sriram also contributed to this story