Prosecutor: FTX founder committed ‘one of the biggest financial frauds’ in US history
02:41 – Source: CNN
Hong Kong CNN —
Investors withdrew as much as $3 billion from Binance on Tuesday, according to blockchain analytics firm Nansen, as the world’s largest cryptocurrency exchange confronted investor jitters amid a deluge of negative headlines about the industry.
Andrew Thurman, content lead for Nansen, told CNN that at its peak, Binance saw “as high as $3 billion in net outflows” over a 24-hour basis. A report about an ongoing investigation by the US Justice Department into the exchange was a factor in investors’ nervousness, he said.
“Concurrently, a large market maker, Jump, was found to have withdrawn huge sums from Binance with no deposits over the past few weeks — ultimately seems to have caused jitters among both retail and institutional users,” Thurman said. “In short, it’s a lot of money headed out, and that’s spooked some folks.”
Jump Crypto is part of the Jump Trading Group, a quantitative trading firm.
Earlier Tuesday, Binance had already seen its “highest daily withdrawals since June,” according to Nansen’s analysis. The rate of withdrawals has since stabilized to approximately $79 million in net outflows, the firm’s data showed as of Tuesday evening ET.
Investors in the industry, already grappling with the “crypto winter” sparked by the collapse of Terraform Labs in May, is dealing with a huge blow from the fall of crypto exchange FTX, which declared bankruptcy in November. Sam Bankman-Fried, the founder of FTX, was arrested in the Bahamas this week after US prosecutors filed criminal charges against him.
Binance was also in the headlines. On Monday, Reuters reported, citing unidentified sources, that US prosecutors were considering wrapping up a money laundering investigation into Binance by “filing criminal charges against individual executives including founder Changpeng Zhao.”
The US Department of Justice did not immediately respond to a request for comment outside US business hours.
In a statement to CNN, Binance said that, “as has been reported widely, regulators are doing a sweeping review of every crypto company.”
“This nascent industry has grown quickly and Binance has shown its commitment to security and compliance through large investments in our team as well as the tools and technology we use to detect and deter illicit activity,” a spokesperson added.
Zhao acknowledged the outflow situation on Tuesday, tweeting that Binance had at one point seen “some withdrawals” of roughly $1.1 billion.
“We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us,” he wrote.
In his Twitter post, the billionaire sought to strike a sanguine note, suggesting that it was “a good idea” for each crypto exchange to generally face “stress test withdrawals.” He later added that Tuesday’s outflows were not among the highest the company had processed.
In a statement to CNN, Binance added: “User assets at Binance are all backed 1:1 and Binance’s capital structure is debt-free.”
On Tuesday, Bankman-Fried was indicted in the United States on eight criminal charges including wire fraud and conspiracy. Separately, US markets regulators also charged Bankman-Fried with defrauding investors and customers.
Known as “SBF,” Bankman-Fried is a crypto celebrity who became a pariah overnight as his company suffered a liquidity crisis and filed for bankruptcy last month, leaving at least a million depositors unable to access their funds.
— CNN’s Matt Egan and Allison Morrow contributed to this report.