Changpeng Zhao’s $1 Billion Rescue Plan Falls Short
After the collapse of FTX, the crypto industry was in turmoil. Prices dropped, investors rushed to minimize their losses, and startup funding disappeared. In the midst of this chaos, all eyes turned to Changpeng Zhao, the founder of Binance, who became the last remaining tycoon in the crypto world after Sam Bankman-Fried’s rapid downfall.
Zhao had a grand vision to save struggling startups and rallied industry leaders to raise at least $1 billion. However, Bloomberg reports that the Industry Recovery Initiative (IRI) failed to meet expectations almost a year later, leaving the crypto market desperate for funds and companies on the verge of collapse.
Changpeng Zhao’s $1 Billion Rescue Plan Fails To Deliver
Zhao’s plan aimed to provide a lifeline to promising startups facing financial constraints beyond their control. Time was of the essence, as Zhao emphasized in a Bloomberg Television interview on November 24.
Unfortunately, a recent analysis by Bloomberg News reveals that less than $30 million has been deployed since the IRI’s inception. Only one out of the nine named participants has invested all of their committed funds. This lackluster outcome has left the crypto asset sector struggling, with companies forced to downsize and cut jobs in order to survive.
While some well-known companies joined the IRI with around $70 million in funds, none came close to Binance’s roughly $1 billion contribution in its branded stablecoin Binance USD (BUSD). The IRI was structured differently from a traditional fund, allowing participants to invest their committed funds as they saw fit.
Binance Rescue Initiative Raises Questions
The IRI promised transparency, with public wallets used to ensure accountability. However, Bloomberg reports that the initiative fell short of this promise. Allegedly, Binance has moved $985 million of the committed funds back to its corporate treasury for other investments.
The last publicly announced deal through the IRI was Binance’s $15 million majority stake purchase in South Korean crypto exchange GOPAX, pending regulatory approval. Despite Binance’s commendable intentions to rescue the crypto market, the lack of follow-through has raised concerns about the industry’s future.
Venture capital investment in crypto firms plummeted after the FTX collapse and has struggled to recover. Startups are finding it challenging to secure funding, with deals taking longer to close. This has dire consequences, leaving many startups in precarious positions and hindering their growth prospects.
Hot Take: Binance Struggles to Fulfill Its Rescue Plan
The aftermath of FTX’s collapse saw Changpeng Zhao and Binance as the last hope for a struggling crypto industry. However, their ambitious plan to raise $1 billion through the Industry Recovery Initiative (IRI) failed to deliver.
Despite Binance’s significant contribution, only a fraction of the funds were deployed, leaving companies in a dire financial situation. Transparency issues arose as Binance allegedly moved a substantial amount of funds back to its treasury.
This failure raises concerns about the future of the crypto industry and its ability to recover from setbacks. Startups are facing difficulties securing funding, leading to downsizing and job cuts. The industry needs a more robust and reliable approach to support struggling companies and ensure long-term growth.
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