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Binance pledges up to $2 billion to bail out beleaguered crypto companies as FTX contagion spreads

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Binance, the world’s largest cryptocurrency exchange led by billionaire Changpeng Zhao, is contributing up to $2 billion to support crypto companies facing financial difficulties following the bankruptcy of rival exchange FTX.

In a statement released late Thursday, Binance said it would set up a $1 billion recovery fund with the intention of increasing that amount to $2 billion in the near future “if needed”. The exchange operator has received approximately $50 million in initial commitments from seven investment firms, including Hong Kong-based Animoca Brands and Jump Crypto, the digital asset arm of Chicago-based trading retailer Jump Trading.

The bailout follows the FTX bankruptcy proceedings of former billionaire Sam Bankman-Fried, which has driven a growing number of crypto companies to the brink of collapse as a trading platform and related businesses. The companies include Genesis Global Capital, the crypto lending subsidiary of US billionaire Barry Silbert’s Digital Currency Group, and Blockfi, the cryptocurrency lender that received credit facilities from FTX.

Binance said it supports companies and projects that experience “significant, short-term financial difficulties through no fault of their own”. The initiative, which will run for about six months, could include instruments such as crypto tokens, fiat currency, equity, loans or lines of credit. It has received 150 applications so far from companies seeking help.

The implosion of Bankman-Fried’s crypto empire was triggered by a tweet posted by Binance co-founder and CEO Zhao announcing the planned sale of FTX’s crypto token. The tweet highlighted a report from Coindesk raising concerns about FTX’s financial health. Since then, FTX has seen a bank run and entered a liquidity crunch as Binance abandoned its deal to bail out the crypto exchange citing due diligence, “last client funds and alleged investigations from US agencies”. Latest news item.”

According to Bloomberg, the UK Parliamentary Treasury Committee last week asked Binance to clarify the circumstances surrounding Zhao’s tweet and whether the company understood the potential ramifications. However, lawmakers said the evidence presented by Binance was disappointing and unacceptable.

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