Binance, one of the most prominent entities in the cryptocurrency ecosystem, found itself at the center of controversy this week following accusations of insolvency linked to the October 10 flash crash that shook the crypto markets. An anonymous user on X, operating under the alias Lewsiphur, publicly accused the exchange of being financially unstable and bearing sole responsibility for the historic liquidation event affecting crypto traders worldwide.
Shortly after levying these claims, the individual reported receiving a cease-and-desist letter purportedly from Binance. Lewsiphur expressed hesitation, stating, "I really want to expose everything I was told from credible resources but I can't risk a legal battle." However, Binance swiftly responded to these assertions by categorically denying that it had dispatched any such cease-and-desist notice. They went further to characterize the letter circulating online as a fabricated document, accusing the author of indulging in an overly imaginative scenario.
The exchange’s rebuttal found support among the X user community, with notes appended to Lewsiphur’s post highlighting that the cease-and-desist letter was forged to fuel a misleading narrative about Binance and to promote the user’s affiliated casino operations. Yet, the debate surrounding the legitimacy of legal threats continues within crypto forums.
Adding nuance to the discourse, another influential X commentator known as Leonidas claimed to have independently authenticated a separate incident where Binance threatened legal action against a user critical of its role in the October 10 event, commonly referenced as "10/10" in crypto circles. Leonidas cautioned the community to disregard fabricated screenshots circulating online, emphasizing that the verified threat incident remains genuine.
Amid the intensifying exchange on social media, some users directed commentary towards Elon Musk, invoking his 2023 commitment to subsidize legal expenses for unfairly targeted X users. They alleged that Binance founder Changpeng "CZ" Zhao and the company itself are actively trying to silence dissenting analysts through litigation threats.
Efforts to obtain an official response from Binance regarding these claims were met with silence as the company did not immediately reply to Benzinga’s requests for comment.
Providing a contrasting perspective to the rumors, blockchain analytics firm CryptoQuant assessed Binance’s financial posture through on-chain data and observed no signs indicative of systemic distress. Their findings noted Binance’s reserves holding steady around 659,000 bitcoins, regular patterns in netflows, and minimal movement of reserves measuring 0.6%, a stark contrast to the 12% drop experienced after the FTX collapse.
Adding further evidence of liquidity and investor confidence, decentralized finance data from DeFiLlama revealed that Binance saw a net capital inflow of $586.50 million on February 4 alone, totaling more than $1.3 billion over the preceding week. These figures suggest sustained user engagement and stable asset holdings at the exchange during a period marked by market anxiety.
In response to the swirling speculations, Changpeng Zhao spoke out directly via his X account, categorically dismissing the rumors of insolvency and threatened lawsuits, characterizing them as FUD intended to undermine Binance’s reputation. These statements aim to reassure stakeholders and preserve trust in the platform amid volatile market conditions.
Regarding the root causes of the October flash crash, Binance released a detailed report attributing the sudden market disruption to a combination of macroeconomic pressures, overleveraged trading positions, and congestion on the Ethereum blockchain network. Despite this official position, critics continue to argue the event was exacerbated by failures within Binance’s own trading infrastructure.
While the precise dynamics of the October incident remain debated within the crypto community, Binance continues to operate as a dominant force in digital asset trading, with active management contested by ongoing scrutiny from users and analysts alike.