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Binance to devote at least $1 billion for crypto recovery fund

Yahoo Finance’s David Hollerith joins the Live show to break down Binance’s $1 billion devotion fund.

Video transcript

[AUDIO LOGO]

BRIAN SOZZI: All right, from retail to crypto, we continue to watch that space. On Thursday, we heard from crypto exchange Binance, announcing new details about its industry recovery fund after the FTX fallout. For more, let's go to Yahoo Finance crypto reporter, David Hollerith. David.

DAVID HOLLERITH: Brian, the fun is targeted at distressed opportunities according to Binance, who put a blog post out about it. And as of now, they've received 150 applications from companies that are seeking support. So the major exchange has also said it intends to potentially ramp up its $1 billion fund to $2 billion in the near future if the need arises.

So far, Jump Crypto, Polygon Ventures, Aptos Labs, Animoco Brands, GSR, and the Brooker Group have all committed to participating and added initially, what's an aggregate commitment of $50 million. A spokesperson with Binance who we spoke with this morning highlighted that the fund is looking for companies that have long-term value creation, a clearly delineated and viable business model, and of course, for the time, a laser focus on risk management protocols.

Now, Binance was reported by the "Wall Street Journal" to have been approached by the prime broker, Genesis Training, which of course, is also facing troubles and having paused withdrawals last week, or two weeks ago now, actually. And now, Genesis is trying to sell its loan book. And Binance has said they initially walked away from the deal, citing that it had certain conflicts of interest with its own business.

And as of now, Binance has said that position has changed. So this relief effort will not be going towards Genesis. All that to say, though, that Binance is clearly coming in as the backstop of the industry. And it's just interesting to see how much it's changed since this summer when CZ, Binance's CEO, is very clear in that he was saying you know, he expressed that not every crypto firm should be saved. And maybe that's one way to read into this relief fund at this point.

- Well, we know he didn't save FTX. And I just want to focus on FTX for a hot second here. We got the first-day motions coming out 10 days into the trial, very unusual. That's how messed up this company was. Books scattered.

We have an interview, a big interview coming up with SBF next week. So just tell me. What's the latest here? What are our expectations on the bankruptcy front for FTX?

DAVID HOLLERITH: Yeah, I mean, I think people make a Lehman comparison a lot of times. And Lehman obviously, was much, much larger and more impactful to the actual economy than FTX was. But the thing that they share in common is they're both what's called a freefall bankruptcy, meaning that neither company had any kind of plan when they had to sort of immediately file for bankruptcy.

So what we're seeing is that from the first day motions, is that to a large degree, FTX, the new liquidators who are sort of managing FTX now, are still very much trying to figure out how much money the company has. And obviously, hours after the bankruptcy filing-- petition was filed, FTX was robbed some $400 million in cryptocurrencies. And those funds are still you know, at large. Hacker has been moving it all across the crypto ecosystem to various different blockchains.

And so I think what's been happening since then, initial chaos at the start, is that the liquidators have been finding more assets than what they had initially valued. So we're expecting to see sort of the cash flow and liquidity for FTX under bankruptcy to continue getting larger. But that all stands to be reasoned that you know, at this point, there's a large degree of funds for the company that are still missing or potentially stolen.

- Yeah. It looks like the assets might be creeping up there, but still well short of those liabilities. Thank you for that report, David Hollerith.