Sunday, January 29, 2023
HomeMarket'The more damage you do now, the more jail time’: Binance’s Zhao...

‘The more damage you do now, the more jail time’: Binance’s Zhao warned FTX founder Sam Bankman-Fried in crypto group chat: report

‘The more damage you do now, the more jail time.’

- Advertisement -

Binance founder Changpeng Zhao reportedly sent a flurry of concerned texts to FTX founder Sam Bankman-Fried the day before the now collapsed crypto exchange filed for bankruptcy, warning him that his trades could destabilize the industry.

In a group chat with other cryptocurrency executives on Nov. 10, seen by the New York Times, Zhao warned Bankman-Fried that an FTX collapse could bring down the rest of the crypto industry, the newspaper reported on Friday.

“Stop now, don’t cause more damage”, he told the disgraced FTX founder, referring to trades FTX and its hedge fund offshoot Alameda were making, which had just caused customers seeking to redeem around $5 billion in deposits, which FTX didn’t have.

Sam Bankman-Fried recently claimed to Bloomberg that he “misaccounted” the $8 billion hole in FTX’s balance sheet and the money was counted twice.

“The more damage you do now, the more jail time,” Zhao told Bankman-Fried on encrypted messaging app Signal.

Earlier that week, Zhao had agreed to buy FTX assets, before later backing out of the deal.

The texts also show Zhao accusing Bankman-Fried of using his hedge fund to drive down the price of stablecoin Tether, which is pegged at $1. He said that Alameda made a $250,000 trade to destabilize Tether.

Bankman-Fried responded with seeming confusion, “Huh? What am I doing to stablecoins?”

“Are you claiming that you think that $250k of USDT
trading would depeg it?” he added.

Zhao said while a $250,000 trade wouldn’t depeg the stablecoin, it could cause problems.

“My honest advice: stop doing everything,” Zhao concluded. “Put on a suit, and go back to [Washington] D.C, and start to answer questions.”

A spokeswoman for Binance did not immediately respond to MarketWatch.

Bankman-Fried did not immediately respond to MarketWatch’s request for comment, but told the New York Times: “Trades of that size would not make a material impact on Tether’s pricing, and to my knowledge neither myself nor Alameda has ever attempted to intentionally depeg Tether or any other stablecoins.”

“I have made a number of mistakes over the past year but this is not one of them,” he added.

A spokeswoman for Tether told MarketWatch: “Once again Tether has demonstrated its resilience to attacks. Tether has been around since 2014 and despite being the subject of enormous scrutiny, has withstood multiple black swan events, honoring all customer redemptions for the entirety of the company’s existence.

“Hopefully, the events surrounding FTX will demonstrate that the actions of a company don’t reflect the ethos and commitment of an entire industry.”

Elsewhere, Bankman-Fried, colloquially known as SBF, is the subject of a number of investigations by the Justice Department and the Securities and Exchange Commission.

SBF hit back at Su Zhu, the co-founder of bankrupt hedge fund Three Arrows Capital earlier on Friday, advising him to “focus on your own house.


- Advertisment -

Most Popular