In a weird echo of what transpired in the early summer of 2022, when the now-defunct crypto exchange FTX had offered to rescue its competitor Voyager Digital as the collapse of Terra’s stablecoin (TerraUSD) rocked the crypto world, Binance has now apparently donned the mantle of the proverbial knight in shining armor for Voyager’s clients, leading some to speculate whether Binance will eventually go down in a similar fashion to that of FTX. As some of our readers would still remember, Terra’s algorithmic stablecoin collapsed a few months back as its internal price stabilization mechanism, which relied on burning or minting either the TerraUSD or the LUNA coin depending on the nature of the price misallocation, failed to keep up with the oncoming velocity of sell orders. In fact, the US federal prosecutors are currently examining whether FTX and Sam Bankman-Fried’s Alameda Research had any role in precipitating Terra’s collapse by contributing to the initial surge of sell orders. The collapse of TerraUSD initiated a chain reaction that then prompted the hedge fund Three Arrows Capital (3AC) to go down in flames. Since 3AC had borrowed $665 million from Voyager Digital, the exchange came under extreme financial distress when the hedge fund reneged on its obligations. Voyager eventually declared bankruptcy, and FTX managed to purchase the company in September in a $1.4 billion auction. Of course, with FTX itself now bankrupt, some continue to speculate that Sam Bankman-Fried (SBF) might have had an ulterior motive when he embarked on a crypto rescue mission in early summer. After all, almost all of the entities that FTX rescued had large holdings of the FTT token – FTX’s native coin. Of course, this token then played an important role in FTX’s collapse a few weeks back when it became public knowledge that Alameda Research had borrowed billions of dollars of FTX client funds by posting illiquid collateral in the form of FTT and other coins, prompting Binance to start dumping its own FTT stash and precipitating a bank run on SBF’s crypto exchange. This brings us to today, when Binance has now inked a $1.022 billion deal to acquire Voyager’s assets. The deal values those assets at $1.002 billion and includes an additional consideration of $20 million. This deal is expected to close in April 2023, and Binance has agreed to provide $10 million initially as a “good faith deposit.” So, how does Binance’s deal with Voyager evoke a feeling of déjà vu? Well, Binance is embroiled in an audit-related controversy at the moment. For starters, the crypto exchange had tasked Mazars to perform an “audit” of its reserves. The auditor’s press statement, however, flagged the limited nature of its engagement with Binance, one that precluded the process of obtaining any actual “evidence” that would have allowed the auditor to form an opinion. Significantly, Binance’s proof-of-reserves attestation glossed over the exchange’s liabilities. This controversy then prompted Mazars to abandon any engagement with crypto entities, citing the possibility of such engagements being “misused.” This has predictably shaken the confidence reposed in Binance and other exchanges. Of course, there are no indications at present that Voyager Digital secretively holds a large stash of the BNB token – Binance’s native coin. Moreover, even with the audit controversy, most critics concede that Binance appears solvent for all intents and purposes. Consequently, the exchange’s rescue of Voyager clients at this stage might not suffer the same ignominious fate that FTX’s previous effort then precipitated.
