Exchanges dismiss rumors of insolvency amid rampant speculation News ▸ Binance ▸ Bitcoin ▸ Bankruptcy
Exchanges dismiss rumors of insolvency amid rampant speculation
Insolvency rumors concerning centralized exchanges like Binance, KuCoin, and Nexo persist following BlockFi's Chapter 11 bankruptcy filing on Nov. 28.
3 min read
Updated: Nov. 29, 2022 at 2:53 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
BlockFi became the latest platform to succumb to crypto contagion, filing for Chapter 11 bankruptcy on Nov. 28.
Weeks before, after FTX had also filed for bankruptcy, BlockFi issued a statement saying it could not “operate business as usual.” At the same time, the firm implemented a pause on withdrawals to “protect our clients and their interests.”
With the spate of recent insolvencies, the crypto community is on high alert over which platform is next to call it a day. Recently, social media chatter has focused on Binance, KuCoin, and Nexo.
AFTER FTX , CELSIUS AND VOYAGER NOW BLOCKFI HAS JUST FILED FOR BANKRUPTCY
WHO DO YOU THINK IS NEXT TO GO BANKRUPT?
— GURGAVIN (@gurgavin) November 28, 2022
Crypto exchanges in the firing line
On Binance, Bitcoin Magazine analyst Dylan LeClair said he was “getting weird vibes from CZ” based on his recent actions.
In addition, LeClair further speculated that the crypto bail-out fund, led by Binance, is a public show of strength, which, when applied to a quote from Sun Tzu’s The Art of War, suggests weakness.
“Appear weak when you are strong, and strong when you are weak.”
However, the Analyst tempered these comments by saying he has no “quantitative proof of any wrongdoing,” nor is he asserting any claims by making these comments. Yet he remains skeptical.
Is anyone else getting weird vibes from CZ right now? It’s like he’s running the SBF summer playbook:
Public projection of strength and talks of “industry bail outs” while attempting to raise funds.
I’m not claiming anything, but the similarities are… odd.
— Dylan LeClair 🟠 (@DylanLeClair_) November 28, 2022
Commenting on the crypto bail-out fund in a recent interview with George Gammon of Rebel Capitalist, Swan Bitcoin CEO Cory Klippsten, who sounded the alarm on Celsius before its demise, said:
“He may be completely insolvent and it may all crash down, it’s very possible. But there is another reason to do it, which is just that if makes you five billion to spend two, then you do that. It could be a simple economic calculation.”
When pressed on his thoughts about Binance’s position, Klippsten mentioned that it appears that the firm has not gone heavy with high-risk directional bets. Like Coinbase, it seems Binance has been content with earning via “the house’s rake,” he said.
“It seems like they have not taken big directional bets and they’ve operated with more transparency, in the crypto world, assigning anyone a rating above zero as far as transparency is very difficult.”
KuCoin dismisses talk of insolvency
Similarly, the founder of Crypto Capital Venture Dan Gambardello pointed out that KuCoin is offering “some ridiculous APRs,” with locked Bitcoin paying out almost 300% interest.
Can someone tell me why Kucoin has some ridiculous APRs right now? Over 200%!
With all the liquidity problems in crypto lately, is this really the best time for this?$BTC 299.49%$ETH 231.89%$USDT 200.25% pic.twitter.com/ldJylt9KTx
— Dan Gambardello (@cryptorecruitr) November 29, 2022
In general, high-interest yield products are a red flag as there are doubts over sustainability, and such strategies have been used in the past to attract a final wave of liquidity only for devs to rug.
KuCoin responded by saying the high APRs relate to their “Dual Investment” products, and not their main earn product. Dual Investment refers to a “non-principal protected financial product with a floating return.” As such, the amount earned depends on the staked asset performance at maturity.
Hello! Have you already checked this article? It's all about KuCoin Dual Investment product which tackles around:
1. Why is Dual Investment a Non-Principal-Protected Financial Product
2. Why is the APR Span of Dual Investment Products so Varioushttps://t.co/hJDP71uf3B— KuCoin Updates (@KuCoinUpdates) November 29, 2022
In a recent interview with CryptoSlate, KuCoin CEO Johnny Lyu dismissed rumors of insolvency, saying the firm is “fully liquid” and working on proof of reserves.
“I can confirm that we’re fully liquid and we are also publishing our asset status right now. As I mentioned, we are also collaborating with third-party auditors right now.”
Nexo said it has zero contagion exposure
On Nov. 16, an API error stopped the daily auditor attestation of Nexo’s assets exceeding its liabilities. The issue was resolved in a matter of hours.
However, the incident was met with a flood of messages on social media, warning that Nexo was insolvent.
With the crypto community still on high alert, Nexo issued a tweet thread on Nov. 28 to address lingering rumors. The thread went in-depth on its sustainable business model, objective liquidation policy, and prudent management of its Nexo Token.
Further, Nexo stated it has zero contagion exposure to bankruptcy or “struggling” entities.
Our risk management ensured that we had $0 exposure to:
– FTX/Alameda;
– Genesis, Gemini, Luno, BlockFi;
– UST/Luna, Three Arrows Capital;
– Celsius, Babel, Hodlnaut;
– Struggling crypto miners. 27/33https://t.co/MJtwTsouhe— Nexo (@Nexo) November 28, 2022
Mentioned in this article
Author 
Samuel Wan
Samuel Wan, a finance professional turned full-time crypto content creator, values individual autonomy and personal freedom in his pursuits.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
KuCoin
KuCoin is a global cryptocurrency exchange for numerous digital assets and cryptocurrencies that launched in September 2017.
Nexo
Nexo is a leading global financial institution specializing in digital asset services, particularly focusing on cryptocurrency lending, exchange, and financial management solutions.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
Klippsten is CEO of SwanBitcoin.com and the author of “Bitcoin: Your Bright Orange Future.” He also serves as an advisor for Riot Blockchain (NASDAQ: RIOT), Unchained Capital, Bitcoin Venture Fund (TVP), and Bitcoiner Ventures.
Dylan LeClair is the head of market research at Bitcoin Magazine and a senior research analyst at UTXO Management..
Changpeng Zhao, popularly known as “CZ,” is a notable figure in the cryptocurrency world, primarily for founding and leading Binance, the world’s leading cryptocurrency exchange by trading volume.
Johnny Lyu is the CEO and one of the co-founders of KuCoin, one of the largest cryptocurrency exchanges launched in 2017.
