Binance CEO ripped Sam Bankman-Fried in texts as FTX crumbled

Binance CEO Changpeng Zhao reportedly blasted his rival Sam Bankman-Fried for destabilizing the entire cryptocurrency industry in text messages sent just hours before FTX tumbled into bankruptcy.

In leaked texts exchanged in a group chat with other unnamed crypto executives on Nov. 10, Zhao warned the disgraced FTX founder that any further missteps would eventually result in more jail time, a report said Friday.

Zhao, more commonly known as “CZ” in crypto circles, also alleged that Bankman-Fried and his allies were making dangerous trades as they scrambled to salvage a crumbling empire.

“Stop now, don’t cause more damage,” Zhao said in texts obtained by the New York Times. “The more damage you do now, the more jail time.”

Zhao and Bankman-Fried clashed in a group text that included “at least three top officials from rival companies” on the secure messaging app Signal, according to the report.

In the days prior to FTX’s collapse, Bankman-Fried secretly transferred $10 billion in FTX client funds to prop up another entity he owned – the cryptocurrency trading firm Alameda Research. FTX and more than 100 affiliates declared bankruptcy on Nov. 11 after facing a liquidity crunch.

Alameda’s trading activity was a subject of conflict in the text thread. At one point in the heated conversation, Zhao reportedly accused Bankman-Fried of attempting to crush the price of Tether, a so-called “stablecoin” that is meant to stay “pegged” to the US dollar.

Zhao identified a $250,000 trade by Alameda that he alleged was an effort by Bankman-Fried and others to unmoor Tether for FTX’s benefit.

“Huh?” Bankman-Fried reportedly replied to the accusation. “What am I doing to stablecoins?”

The Binance CEO went on to reiterate his view that Bankman-Fried should stand down from all trading activity.

“My honest advice: stop doing everything,” Zhao said. “Put on a suit, and go back to DC, and start to answer questions.”

“Thanks for the advice!” Bankman-Fried reportedly responded.

Binance declined the Times’ request for comment on the texts.

Bankman-Fried told the newspaper that Zhao’s allegations in the texts were “absurd.”

“Trades of that size would not make a material impact on Tether’s pricing, and to my knowledge neither myself nor Alameda has ever attempted to intentionally depeg Tether or any other stablecoins,” he said. “I have made a number of mistakes over the past year but this is not one of them.”

Binance played a key role in the FTX saga. Zhao’s firm initially reached a deal to bail out FTX from the cash crunch that triggered its collapse – only to back out of the agreement at the last minute after examining its doomed rival’s balance sheet.

Bankman-Fried has agreed to testify before the House Financial Services Committee next week during a hearing on FTX’s bankruptcy. He also faces a potential subpoena to appear at a similar hearing before a key Senate panel.

Zhao continued his criticism of Bankman-Fried in texts earlier this week, describing the ex-billionaire as “one of the greatest fraudsters in history” who is “also a master manipulator when it comes to media and key opinion leaders.”

The Binance boss hasn’t escaped scrutiny during the ongoing period of upheaval in the cryptocurrency sector.

Last month, noted economist Nouriel Roubini – known as “Dr. Doom” for his dire predictions – singled out Zhao as a “walking time bomb” while sharply criticizing bad actors within the crypto industry.

“What are the 7 C’s of crypto? Concealed, corrupt, crooks, criminals, con men, carnival barkers and, finally, CZ,” Roubini said — the latter being a reference to Zhao.