In a dramatic escalation of tensions within the cryptocurrency industry, OKX CEO Star Xu has publicly criticized Binance, alleging that its marketing strategies contributed significantly to the recent market meltdown that wiped out nearly $19 billion on October 10. Xu’s accusation comes as the crypto space grapples with the aftermath of a crisis that exposed vulnerabilities in the sector’s operational framework.
On January 31, via a post on X (formerly Twitter), Xu articulated his position, suggesting that the October 10 crisis was not merely a coincidence but rather a predictable failure stemming from inadequate risk management practices. “No complexity. No accident. 10/10 was caused by irresponsible marketing campaigns by certain companies,” he wrote, pointing fingers at Binance’s promotional efforts surrounding Ethena’s USDe synthetic dollar.
Xu posited that Binance’s aggressive user-acquisition tactics, promoting USDe with an enticing annual yield of 12%, created a precarious environment where excessive leverage was not only encouraged but commonplace. According to Xu, this posture led to a “leveraged loop,” wherein traders exchanged traditional stablecoins for USDe, seeking to maximize yield. He further claimed that this practice inflated USDe’s perceived annual percentage yield (APY) to as high as 70%, adding further complexity and fragility to the market.
He criticized USDe’s lack of traditional backing compared to standard stablecoins like USDT and USDC, emphasizing that USDe operated using a delta-neutral hedging strategy that, in his view, exposed users to risks typically associated with hedge funds. When the market experienced turmoil on October 10, the leveraged positions began to unwind dramatically, causing USDe to lose its peg and triggering a wave of liquidations that disrupted several assets across the market.
“As the largest global platform, Binance has outsized influence—and corresponding responsibility—as an industry leader,” Xu stated, underlining the need for transparency and accountability in the crypto sector. He argued that sustained trust in cryptocurrencies cannot be established on short-term yield chasing or marketing that obscures inherent risks.
However, industry responses to Xu’s claims have been swift and blunt. Key figures, including Haseeb Qureshi, managing partner at Dragonfly, countered his narrative by analyzing the sequence of events during the crash. Qureshi highlighted that Bitcoin’s price had already bottomed approximately 30 minutes before USDe deviated from its peg. He dismissed Xu’s assertions as a misrepresentation of cause and effect, pointing out that the liquidation issues were broader than any single event or asset.
Additionally, Guy Young, the founder of Ethena Labs, backed Qureshi’s arguments, presenting order-book data that showed the USDe price anomaly occurred after the market had already begun its downslide.
In contrast, Binance defended itself against Xu’s allegations, attributing the chaotic market conditions primarily to a “liquidity vacuum.” The exchange released statistics indicating that liquidity for Bitcoin had essentially dried up across numerous platforms during the crash. Binance insisted that the subsequent price decline was a mechanical response to market makers withdrawing inventory amid extreme volatility.
This public exchange of accusations illustrates the increasing tensions among leading cryptocurrency exchanges, particularly as they navigate ongoing scrutiny regarding the systemic risks highlighted by the turbulent events of October 10. As the industry continues to evolve, the focus on responsible risk management practices and transparent marketing strategies is becoming ever more critical.
