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Here’s Why Binance Plans to Liquidate Its FTX Token (FTT) Holdings

Cointime Staff· 3 min read

Binance will liquidate all the remaining FTT tokens from the $2.1 million crypto fund it received last year after exiting FTX equity.

On Sunday, the chief executive of Binance, Changpeng Zhao (CZ), disclosed that Binance would liquidate the remainder of its FTT token (FTX’s native cryptocurrency) holdings in the coming months.

CZ said the decision is a post-exit risk management attempt made based on the dubious FTT reserve of Alameda Research and FTX making rounds lately on Twitter.

Binance to Liquidate All FTT Tokens in Its Book

Alameda reportedly holds about $5 billion worth of FTT tokens, the single largest token holding in its reserve. Per Coindesk, the trading firm has approximately $3.66 billion in unlocked FTT, $2.16 billion in FTT collateral, and $292 million of locked FTT. Compared with FTT’s current market capitalisation of about $3 billion, Alameda’s FTT balance appears illiquid.

In light of the revelation, Binance CEO said they would liquidate the remaining FTT tokens in their book, which the exchange received after leaving FTX equity in 2021. “We will try to do so in a way that minimises market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete,” CZ wrote.

Binance holds at least 23 million FTT tokens, worth about $505 million at the current market rate. CZ confirmed this on November 5th, as Whale Alert spotted 22,999,999 FTT transferred from an unknown wallet to Binance. In response, CZ said it was part of the tokens received from FTX equity.

Are FTX and Alameda Going Insolvent?

Binance’s decision on Sunday fueled speculations that FTX exchange and its sister company Alameda Research by Sam Bankman-Fried could be going insolvent, given their holding appears illiquid against the actual market cap of FTT tokens in circulation.

Many accused FTX of pushing the “Flywheel scheme,” in which the exchange prints FTT out of thin air and lend the tokens to Alameda Research, which the trading firm then used to borrow USD stables for real money.

“Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs,” CZ noted in a separate tweet.

By Ibiam Wayas

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