Binance was hit with an exodus of user funds exceeding $1 billion withdrawn over a 24-hour stretch this week. This mass withdrawal event coincided with Tuesday’s news that Binance’s legendary founder Changpeng Zhao had pleaded guilty to criminal violations of U.S. federal laws.
Specifically, over $1 billion in net outflows occurred between Tuesday afternoon and Wednesday afternoon Hong Kong time, signaling a loss of user confidence in the wake of Zhao’s guilty pleas. Moreover, Binance’s net outflows over the previous 7-day period totaled over $700 million, pointing to heavy withdrawals leading up to and following the founder’s legal troubles becoming public.
Analyzing the blockchain data shows that around $605 million of the withdrawals happened over major networks like Ethereum, BNB Chain, Avalanche, Fantom, and Polygon. This means a sizable majority of the funds flying out of Binance platforms were cryptocurrencies as investors looked to safeguard their assets.
The catalyst for this wave of withdrawals was Zhao agreeing to pay a $50 million personal fine and step down as CEO of Binance as part of a larger $4.3 billion settlement with U.S. regulatory and law enforcement agencies. Both Zhao and Binance as a company pleaded guilty to an array of crimes including money laundering, sanctions evasions, and illegally transmitting money without proper licenses.
As Binance reeled from the fallout, rival exchange OKX capitalized by taking in $152 million in net inflows over the past day – the most of any major platform. The turmoil also sent Binance’s BNB token plunging over 9% this week. While Binance’s future U.S. prospects look uncertain under the weight of these penalties, the company has vowed to improve compliance controls after years of allegedly using inadequate anti-money laundering measures.
