FTX Victim Sounds The Alarm Over A Binance Collapse

If there's one person who has earned the right to sound the alarm over an exchange's imminent collapse, it's probably Travis Kling.

That's because in the days following FTX's collapse, Kling had the devastating misfortune to have to notify his fund's clients that the majority of their assets had just gone down with the exchange.

Since then, Kling has taken a step back from crypto and now tells Coinage he can't help but notice the similarities between Binance's current struggles and FTX's pre-crash jitters. He's even gone as far to say that Binance CEO Changpeng Zhao is emulating the very same playbook that led to FTX's demise.

"When I look at that evidence and I compare it to what happened on FTX, it is my base case that Changpeng has been using customer funds to defend BNB's price. And he has been willing to do that because if BNB's price collapsed this would all be over anyways," Kling told Coinage on Monday, stressing it was just his conjecture based on the currently public information from the CFTC and SEC lawsuits. "He's willing to dig the hole deeper and deeper."

Of course, Binance and CZ have been playing defense ever since the SEC lawsuit accused CZ of running an operation that includes faking trading volumes by using separate entities he also controls. On Tuesday, CZ reiterated his innocence, noting that Binance has not "sold BTC or BNB."

But what has made Kling even more suspicious of CZ and Binance's operations doesn't only stem from public lawsuits. Kling initially received a direct message from CZ on Twitter back in December of last year after Kling first publicly raised issues about Binance. Immediately after, CZ unfollowed Kling.

"His response was super creepy to me," Kling told Coinage about CZ's attempt to counter Kling's Binance accusations by highlighting that people lose money in crypto in other ways, too. "It's really just about the last type of response you would want from the founder of the dominant crypto exchange, and probably the most powerful person in crypto."

Since that exchange with CZ, Kling says the majority of the facts that have come to light have only strengthened his call that Binance is destined to meet the same fate as FTX.

"It paints a picture of just a big pile of assets that get moved around without regard for segregation between ... profits from trading fees from Binance.com versus customer assets — it does not in anyway paint a picture that there is proper accounting behind all these things."

However, Kling admits Binance may still be fine if they really do have the same amount of cash on-hand to honor customer account balances in an ensuing rush of withdrawals. In his personal view, he'd advise against anyone waiting around to find out if it's the case.

"Given the tremendous amount of smoke around this, it's looking less and less likely that there isn't a fire," he said. "An exchange token that can be used for collateral, plus commingled funds, plus a non-liquidation agreement account that is run by the founder of the exchange, you put those three things together and that is a recipe for a major league problem."

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