Binance CEO Changpeng Zhao Lists Five Classic Red Flags in Crypto Projects Amid FTX Collapse

Binance CEO Changpeng Zhao is warning people after FTX’s collapse to avoid crypto projects that are displaying five key red flags.

Zhao tells his 7.5 million Twitter followers what to look out for when getting involved with crypto-related enterprises.

“FTX aside, avoid businesses/exchanges/projects that:

– are not profitable (musical chairs)

– survive by selling their own tokens

– give high incentives for locking your tokens

– have a large total supply, but only a small circulation supply

– involves loans.”

He also advises those embarking on such projects to protect people’s investments by having an emergency reserve fund to protect investor assets, or a Secure Asset Fund for Users (SAFU).

Zhao tells his followers that Binance is committed to transparency to assure customers and investors they are on solid footing after the FTX collapse rattled the crypto markets.

“Binance published cold wallet addresses and balances for 6 of our 600 coins. More to come. 475,000 BTC, 4.8 million ETH, 17.6 billion USDT, 21.7 billion BUSD, 601 million USDC, 58 million BNB. These were public before anyway, but organized together for your ease of viewing.”

Zhao had previously given other advice to those working in the crypto space, saying that there are two major lessons from the fallout.

“Two big lessons:

1: Never use a token you created as collateral.

2: Don’t borrow if you run a crypto business. Don’t use capital ‘efficiently’. Have a large reserve.”

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Featured Image: Shutterstock/Tithi Luadthong