CZ Zhao, CEO of Binance, announced on Sunday that the crypto exchange would liquidate all of its holdings in FTT, FTX’s native token.
The CEO mentioned “recent revelations that have come to light” but did not go into further detail nor follow up on clarification requests.
The move comes after intense criticism of FTX’s CEO and founder Sam Bankman-Fried regarding his regulatory proposal, which called for restrictions on DeFi. Soon after, he promised to revise the position he took on regulation.
Funds were received by Binance last year as part of its exit from its early equity position in FTX. Binance’s stake in FTX was purchased by FTX for $2.1 billion using FTT and BUSD — the stablecoin backed by Binance — as Zhao revealed.
It will take several months for the liquidation to complete because of the market’s conditions and liquidity limitations, according to Binance’s CEO. Also the FTT market impact will also be minimized as much as possible.
Even so, the price of FTT dropped 9.5% in one day from $25.55 to $23.03, based on CoinGecko’s data, recovering from its Sunday low of around $22.
Approximately $584 million in FTT was moved from a wallet to Binance’s exchange on Saturday, information from Etherscan shows. The amount is about 17% of the entire circulating supply of FTT, CoinGecko estimates. CZ admitted that the transferred funds were part of Binance’s effort to liquidate its FTT holdings.
In a tweet on Sunday, Zhao clarified that the exchange’s decision to sell its stake in FTT was not targeted at the company’s competitor. Nevertheless, some Twitter users have suggested that the sale of the token may affect the loans backed by it.
Caroline Ellison, the CEO of Bankman-Fried’s cryptocurrency trading firm Alameda Research, proposed to buy the remainder of Binance’s FTTs for a 22-dollar price if Zhao intended to minimize market impact.
Among the major exchanges in terms of FTT volume, Binance led the way. In just 24 hours, Binance handled $6.3% of the total FTT trading volume, which is $95.4 million, based on CoinGecko data.
In the early days of FTX, Binance was a significant investor, although the amount of the initial investment is unknown.
In an interview with Forbes shortly after exit, Zhao commented, “We’ve seen tremendous growth from them, we’re very happy with that, but we’ve exited completely.”
In a statement on Sunday, CZ stated that Binance usually keeps tokens for a long period of time; however, the exchange had held onto its positions in FTT for too long, according to the CEO.