Binance CEO Changpeng Zhao reportedly warned and lambasted Sam Bankman-Fried for destabilizing the entire crypto industry, in a text message sent just hours before FTX, Bankman's company, went bankrupt.
In the text on the leaked Signal app, quoted by us from the New York Post, Zhao warned the FTX founder that if there were any further missteps, Bankman would be in jail for a long time.
Zhao, better known as "CZ" in crypto circles, alleges that Bankman and colleagues carried out dangerous business actions at FTX. "Stop now, don't do any more damage," Zhao snapped. "The more damage you do now, the longer you will be in prison."
Shortly before the FTX collapse, Bankman secretly transferred USD 10 billion in FTX client funds to prop up another entity he owns, namely cryptocurrency trading firm Alameda Research. FTX and more than 100 of its affiliates declared bankruptcy on November 11 after facing a liquidity crunch.
The bankman is currently imprisoned in the Bahamas and is threatened with extradition to the United States with the core accusation of embezzling customer funds. Reportedly, he faces 115 years in prison. Zhao himself had previously labeled Bankman a fraud.
Zhao said Bankman misused money from FTX consumers. "Sam knew that he was using user funds to trade for Alameda. I was shocked, I didn't know that he had lied to everyone," said Zhao.
So, FTX uses the money deposited by its users to trade through Alameda Research which is high risk. Zhao learned of the ulcers after his company, Binance, researched FTX's finances.