Binance CEO Changpeng Zhao slams FTX boss Sam Bankman-Fried

Binance CEO Changpeng Zhao, a key player in the dramatic collapse of rival cryptocurrency exchange FTX, called Sam Bankman-Fried a “liar” who had knowingly misappropriated customers’ money.

“Sam knows that he was using the user funds to do trading for Alameda,” Zhao said, referring to FTX’s sister analytics firm that was run by Bankman-Fried’s on-again, off-again girlfriend Caroline Ellison.

“He has been probably doing this for quite a while and nobody else knew until very recently,” Zhao said.

“I’m just shocked,” he added. “I didn’t know that he lied to everyone a week ago.”

Zhao said that while he supports tighter regulations over the crypto industry, it is unlikely that more oversight would have prevented FTX’s collapse.

“When a person lies, when there is a bad player that just wants to do bad things, regulations do not prevent it,” he said. “Banning guns doesn’t mean no one will take a gun and shoot somebody.”

Zhao’s company was in talks to buy out FTX but then pulled out and sold its holdings in FTT, the digital asset created by FTX, sparking a $6 billion run on the crypto exchange in which customers frantically sought to pull their deposits.

Now Bankman-Fried finds himself in hot water after it was discovered that FTX was using customer deposits to make risky bets using sister investment firm Alameda Research.

Zhao — known as “CZ” in crypto circles — said that when his company looked at FTX’s books, it was apparent there was a problem.

“It was pretty clear pretty soon that there was a misappropriation of user funds,” Zhao told CNBC’s “Squawk Box” on Thursday. “The user funds were gone.”

“It was clear that [Bankman-Fried] lied to his users, his investors, his VC investors, his employees,” Zhao said. “At that point, we couldn’t trust the data anymore and it was hard for us to do our due diligence, so we didn’t go very far.”

“We are very concerned about anyone using the tokens they create for leverage, as a collateral,” Zhao added. “At Binance, we don’t do that.”

Like FTX, Binance also has an in-house digital token called BNB. But Zhao insisted to CNBC that BNB has never been used as collateral and that his firm is operating at a profit with significant cash reserves on hand — unlike his bankrupt competitor FTX.

“Binance has never used BNB for collateral, and we have never taken on debt,” Zhao said.

Bankman-Fried, meanwhile, tweeted late Wednesday that his company “got overconfident and careless.”

“Once upon a time–a month ago–FTX was a valuable enterprise,” Bankman-Fried tweeted on Wednesday. “FTX had ~$10-15b of daily volume, and roughly $1b of annual revenue. $40b of equity value.”

He added: “And we were held as paragons of running an effective company.”

“As it turned out, I was wrong: leverage wasn’t ~$5b, it was ~$13b,” according to Bankman-Fried. “$13b leverage, total run on the bank, total collapse in asset value, all at once.”

Bankman-Fried wrote: “It sucks. I’m really sorry that things ended up as they did. And as I said — I’m going to do everything I can to make it more right.”

Bankman-Fried told the news site Vox on Wednesday that his biggest regret was throwing FTX into Chapter 11. He also dismissed suggestions that tighter regulation would have prevented his company’s collapse.

“F–k regulators,” he said. “They make everything worse. They don’t protect customers at all.”