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“Bailouts Don’t (Always) Make Sense”: Binance’s CZ Weighs in on Industry Lifelines

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Just days after FTX offered lifelines to troubled crypto firms, Binance CEO Changpeng Zhao has weighed in about crypto industry bailouts.

Yesterday, we reported that Alameda Research – a trading firm managed by FTX CEO Samuel Bankman-Fried – has lent Voyager US$500 million to help the broker recover its losses. The handout followed FTX’s BlockFi bailout of a US$250 million revolving credit facility.

Read more: Crypto Contagion Spreads as Voyager Digital Reveals US$665M 3AC Exposure

Both BlockFi and Voyager had faced a liquiditiy crisis due to their exposure to distressed crypto hedge fund 3AC.

Bankman-Fried had previously expressed a responsibility to rescue the crypto industry. “Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what can help it grow and thrive,” he said earlier this month.

Conversely, Zhao couldn’t disagree more. In a blog post on Binance‘s website posted Thursday, Zhao admitted that “as one of the largest industry players with healthy cash reserves” Binance does have “a responsibility to help industry players survive and hopefully thrive.”

However, the CEO stated that “the word bailout can have different meanings to different people” highlighting that “bad projects (poorly designed, poorly managed, poorly operated) should not be saved.”

Read more: “Failure is Part of the System”: CZ Closes Consensus 2022

“There are always more failed projects than successful ones,” he added, stating that “bailouts here don’t make sense. Don’t perpetuate bad companies. Let them fail.”

For Zhao, “projects that made small mistakes” such as engaging in aggressive spending, or having insufficient reserves could be worth saving.

“These can be bailed out and subsequently ensure changes are made to fix the problems that led them to this situation in the first place,” he said.