Binance CEO Changpeng Zhao announced that his company has allocated another $1 billion to its Industry Recovery Initiative (IRI). The fund contributed to by industry players like Polygon, Aptos and Tron aims to help crypto companies that are facing financial troubles by purchasing their assets.
Binance, the world’s largest cryptocurrency exchange by trading volume, has allocated another $1 billion to its crypto recovery fund. The Industry Recovery Initiative (IRI) was announced as part of the company’s efforts to purchase crypto assets from companies that are in financial distress.
The Binance-led joint fund was contributed to by venture capital firms GSR, Kronos, Brooker Group, and Polygon Ventures, the VC arm of Polygon network, and crypto companies such as trading firm Jump Crypto and Aptos blockchain developers Aptos Labs. Earlier this year, the company committed $1 billion to its user insurance fund called the Secure Asset Fund for Users (SAFU), which it had established in 2018.
The news was announced by Binance CEO Changpeng “CZ” Zhao.
This year, markets have been plagued by the crypto winter which took down a number of industry giants along with it. Crypto lending firms Celsius, Voyager Digital, and BlocFi, crypto hedge fund Three Arrows Capital (3AC), and crypto exchange FTX, have all filed for bankruptcy after falling prey to a liquidity crisis created by a downtrending market.
FTX, which was once valued at $32 billion, collapsed after it was revealed that the company mismanaged user funds. Before it’s implosion, FTX was one of the largest cryptocurrency exchanges and a prominent player in the industry. The company founded by former billionaire Sam Bankman-Fried (SBF) owes $8 billion in liabilities to more than a million creditors. In November, the exchange halted all services and froze customer assets without warning.
Binance had initially agreed to buy all assets held by FTX under its subsidiary in the U.S., even signing a non-binding letter of intent with the company. SBF had intended to raise between $10 billion and $20 billion to solve the liquidity crunch faced by his firms FTX and Alameda Research before selling off assets to Binance. However, after assessing the company’s finances and its complications with regulators, Binance put out a statement saying that they will not be pursuing the deal any further.
An investigation into FTX’s balance sheet showed that the company had a very complicated business relationship with market maker Alameda Research. The sister company was holding all of FTX’s assets including customer funds and other investments worth upwards of $14 billion. Alameda held the majority of its reserves in FTT tokens that were created by FTX, which led to allegations that both companies were manipulating the price of FTT to create value that did not exist, in turn defrauding customers into buying the tokens. FTX holding over $5 billion worth of its reserves in a native token with no utility outside its exchange instead of valuable assets like fiat currency or Bitcoin (BTC) seemed suspicious to those that were looking into the company before its demise.
Last week, crypto prime broker Genesis Trading approached Binance to seek emergency funding through the Industry Recovery Initiative. Genesis, which had an exposure of $175 million to FTX through its derivatives unit, suspended customer withdrawals on November 16th after FTX filed for bankruptcy. Binance once again walked away from the deal alleging that Genesis’ operations potentially posed a conflict of interest to its own.
The collapse of FTX is dubbed by financial analysts as one of the worst in corporate history, wiping out $60 billion from the crypto market. Bitcoin reached a two-year low in the days that followed touching $15,000. In August, FTX had agreed to purchase assets from now insolvent crypto lender Voyager Digital in a manner similar to Binance’s SAFU initiative. Voyager has since terminated its $50 million deal with FTX and relisted the company assets for sale.
Binance’s $2 billion crypto recovery initiative contributed to by major industry players will help projects that face a liquidity crisis. Tron blockchain founder Justin Sun has said that his companies Tron, Huobi Global, and Poloniex will support the fund. Jump Crypto and Aptos Labs will contribute a combined $50 million to the initiative in Binance stablecoin BUSD.
“We will all try to collect the other industry players together to form an industry association globally, and try to deal with some of the common standards in business,” said Binance founder CZ speaking at the B20 Summit in Indonesia last month.
BNB, the native token of Binance, is trading at $294.82, down over 5% in the last 24 hours caused mainly by a market fallout.