In the wake of the collapse of the crypto exchange FTX and its sister company Alameda Research, Binance announced the formation of what it calls an “industry recovery fund” aimed at salvaging crypto projects facing 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,” Binance CEO Changpeng Zhao, commonly known as CZ, wrote in a tweet on Monday.
He added that more details regarding the initiative would be announced soon while urging projects that think they “qualify” to contact Binance Labs.
The Binance chief said that “other industry players with cash” are welcome to co-invest in the fund.
“Crypto is not going away. We are still here. Let’s rebuild,” proclaimed CZ.
Is a recovery fund the right move?
Several prominent crypto personalities, including Tron founder Justin Sun and BankToTheFuture CEO Simon Dixon, have already expressed their willingness to join the initiative.
“Let’s make this an industry effort,” wrote Dixon.
While it is not immediately clear what the proposed industry recovery fund will be about, some commentators have also raised concerns about how to tell the difference between someone legitimately having a liquidity problem and someone being a fraud.
“You can’t backstop billions in offside liabilities without first fixing Ponzi business models. This industry fund sounds like fluff or a bad decision,” said Sean Penso, Managing Partner at Cortelyou Capital.
Decrypt reached out to both Binance and Binance Labs for comment.
Sam Bankman-Fried’s FTX filed for Chapter 11 bankruptcy on Friday after a week of dramatic events that saw the exchange face a liquidity crunch and ultimately freeze withdrawals after customers rushed to get their funds off the trading platform.
The firm’s sister entity Alameda Research, its American subsidiary FTX.US, and roughly 130 affiliated entities will also be filing for bankruptcy.
Given FTX’s high profile, which penned deals with sports stars like Tom Brady and a massive $135 million deal to rename the Miami Heat stadium, there are fears that its collapse will have a cascading effect on the entire industry, with more big firms to follow the same path.
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Source: https://decrypt.co/114346/binance-ceo-announces-industry-recovery-fund-ftx-exchange-collapse
