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Binance CEO Changpeng ‘CZ’ Zhao has released the chat logs of the company’s internal leadership team during the Terra crisis.
The records detail a conversation between CZ and Binance chief product officer Mayur Kamat discussing what to do with Binance’s 15,000,000 LUNA, once worth $1.6 billion. The coins were part of the company’s initial $3 million investment in Terra and are now worth just $2,700.
giving up billions
In a tweet thread from May 16, CZ said:
“Binance will let this slide and ask the Terra project team to compensate retail users first and Binance last, if ever.”
The release of the chat logs shows that this decision took only five minutes to decide. In a text message to CZ, Kamat stated:
The ability to decide to forgo billions of dollars to put its users first is extremely foreign to traditional capital markets. A CEO has a fiduciary duty to make decisions that best serve the company, not necessarily their customers.
The interests of both groups are often correlated, yet Binance could have saved hundreds of millions of dollars by selling its LUNA tokens in the midst of the crisis. Failing to do so prevented the situation from getting even worse (if possible) and means that Terra LUNA will remove 15,000,000 LUNA Coins from the new LUNA fork. A comment from Kamat reviewing the events says:
“You will see signs that tell you that you are working in an extraordinary company. Usually it will be on decisions made when things were tough. That said, I’ve never worked anywhere where we made them that fast.
Money is fungible, even in large amounts. But user trust is much harder to gain and much faster to lose. Prioritize what’s important and protect users to the best of your ability.”
Kamat’s logic makes a strong case that the decision to let billions of dollars disappear is best for Binance in the long run. A company that is seen as protecting its users at considerable cost to itself may well be preferred by users.
Was this just a public relations exercise?
However, it is also possible that Binance could not have done anything about the $1.6 billion LUNA coins, even if it had wanted to. This can all be a PR move, and the release of the screenshots is simply part of a campaign to promote a positive image of the company. Gaining access to private keys for exchange wallets is notoriously tricky by design. The use of multi-sig wallets or the division of private keys among key members of leadership is often used to protect against embezzlement and fraud.
As of May 9, it took less than 48 hours for LUNA to drop by 98% to just $1 per coin. At this point, UST was trading around $0.21, and Do Kwon and the LFG team began selling tens of thousands of Bitcoin to restore parity. By May 11, UST had reached $0.79 and there were signs of recovery. However, the algorithmic relationship between UST and LUNA caused the latter to crash to $0.00000136 on May 13.
At this point, Binance LUNA Coins were worth just $20.40. CZ’s tweet detailing that Binance would not be moving or selling its 15 million LUNA came on May 16. Therefore, unless Binance decided not to sell the LUNA coins before May 10, the coins had no real value anyway.
Will Binance List LUNC?
Whatever the reason for not selling the tokens, it’s still a nice gesture to the Terra community that one of the original investors is willing to give up any airdrops so as not to dilute the rest of the ecosystem. However, an alternative theory is that Binance wants nothing to do with the new chain and may not even list it after its launch. Two chains will be created on May 27 when the fork happens. The new string will be named $LUNA and the current string will be named $LUNC. Will Binance list both coins or choose to remove itself from the Terra system entirely?
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This post Binance took just 5 minutes to overcome $1.6B loss on LUNA
was published first on https://cryptoslate.com/binance-took-just-5-minutes-to-get-over-loss-of-1-6b-in-luna/