Binance took just 5 minutes to get over loss of $1.6B in LUNA

Please fol­low and like us:
Pin Share

👋 Want to work with us? Cryp­toSlate is hir­ing for a hand­ful of positions!

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 head of prod­uct Mayur Kamat in which they dis­cuss 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 go and ask the Ter­ra project team to com­pen­sate retails users first and Binance last, if ever.”

The release of the chat logs show­cas­es that this deci­sion took just five min­utes to decide. In a text mes­sage to CZ, Kamat stated:

cz text
Source: LinkedIn

Users first

The abil­i­ty to decide to forego bil­lions of dol­lars to put its users first is some­thing extreme­ly alien to tra­di­tion­al cap­i­tal mar­kets. A CEO has a fidu­cia­ry duty to make deci­sions that best serve the com­pa­ny, not nec­es­sar­i­ly its customers.

Both groups’ inter­ests are often cor­re­lat­ed, yet Binance could have saved hun­dreds of mil­lions of dol­lars by sell­ing its LUNA tokens amid the cri­sis. Not doing so stopped the sit­u­a­tion from being 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 reads,

“You will see signs that tell you that you are work­ing in an extra­or­di­nary com­pa­ny. It will usu­al­ly be in deci­sions made when things were hard. That said I have nev­er worked any­where where we made them this quickly.

Mon­ey is fun­gi­ble, even large amounts. But user trust is much hard­er to gain and much faster to lose. Pri­or­i­tize the impor­tant and pro­tect the users the best you can.”

Kamat’s log­ic makes a strong case for the deci­sion to let bil­lions of dol­lars dis­ap­pear being in the best inter­est of Binance long term. A com­pa­ny being seen to pro­tect its users at a con­sid­er­able cost to itself may well be one that users prefer.

Was this just a PR 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 do so. This may 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-held wal­lets is noto­ri­ous­ly tricky by design. The use of mul­ti-sig wal­lets or split­ting pri­vate keys among key lead­er­ship mem­bers is often used to pro­tect against embez­zle­ment and fraud.

From May 9, it took less than 48 hours for LUNA to crash 98% down 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 the peg. By May 11, UST had reached $0.79, and there were signs of a recov­ery. How­ev­er, the algo­rith­mic rela­tion­ship between UST and LUNA caused the lat­ter to crash down to $0.00000136 by May 13.

At this point, Binance’s LUNA coins were worth just $20.40. CZ’s tweet detail­ing that Binance would not be mov­ing or sell­ing its 15 mil­lion LUNA arrived on May 16. There­fore, unless Binance decid­ed not to sell the LUNA coins before May 10, the coins did not hold any real val­ue anyway.

Will Binance list LUNC?

What­ev­er the rea­son for not sell­ing the tokens, it is still a nice ges­ture to the Ter­ra com­mu­ni­ty that one of the orig­i­nal investors is will­ing to forego any air­drop 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 release. Two chains will be cre­at­ed on May 27 when the fork occurs. The new chain will be named $LUNA, and the cur­rent chain will rename $LUNC. Will Binance list both coins or choose to remove itself from the Ter­ra sys­tem entirely?

Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *