Binance releases detailed report on "1010 historic liquidation," Zhao Changpeng denies profiting from the crash, Xu Mingxing says "it was caused by Binance's irresponsibility."

Binance releases detailed report on "1010 historic liquidation," Zhao Changpeng denies profiting from the crash, Xu Mingxing says "it was caused by Binance's irresponsibility."

The world’s largest cryptocurrency exchange, Binance, blamed last year’s historic $19 billion liquidation on October 10 on a confluence of macro risk shocks, high leverage, and liquidity exhaustion, denying that a core trading system failure was the main cause. However, this explanation failed to quell industry doubts about its marketing strategy and market influence.

In a report released Saturday, Binance said the global market was already under pressure from Trump’s tariff news that day, and a combination of over $100 billion in Bitcoin derivatives open interest, sharply shrinking order books, and blockchain congestion together triggered a chain reaction of liquidations. The exchange acknowledged two platform-specific issues but emphasized that about 75% of liquidations happened before the index deviation, and it has compensated users more than $328 million.

Binance co-founder Changpeng Zhao on Friday denied in a live Q&A that the platform was the key driver of the liquidation wave, calling related accusations “far-fetched.” He stated that users who suffered losses due to platform system issues have been compensated, and that Binance, regulated in Abu Dhabi and still under US government monitoring, operates transparently.

But OKX CEO Star Xu accused Binance after Zhao’s statement of “irresponsible marketing campaigns” that triggered the crash, especially the promotion of high-yield products linked to the USDe stablecoin. He said Binance, as the largest global platform, has “massive influence and corresponding industry leadership responsibility.” After the October crash, Bitcoin has continued to struggle, currently trading about 36% below its all-time high.

Macro Shock Triggers Liquidity Exhaustion

Binance detailed the mechanism of the October 10 market crash in its report. The tariff-related news that day already pressured global markets, and months of steady rises in Bitcoin and Ethereum had left traders highly leveraged and concentrated in exposure. Open interest in Bitcoin futures and options exceeded $100 billion, creating ripe conditions for forced deleveraging.

The sell-off quickly became self-reinforcing. As prices fell, market makers activated automatic risk controls to reduce exposure, pulling liquidity from order books. Binance cited Kaiko data showing that during peak volatility, buying depth at major exchanges almost disappeared. With very few orders, even small-scale liquidations could significantly drive prices lower.

This turbulence was not limited to crypto markets. The US stock market lost about $1.5 trillion that day, with the S&P 500 and Nasdaq posting their biggest one-day drops in six months. Binance said about $150 billion in systemic liquidations occurred in global markets that day.

Blockchain congestion heightened the stress. Ethereum gas fees (transaction fees for on-chain activity) surged above 100 gwei, slowing transfer speed and limiting cross-exchange arbitrage. Since funds couldn’t move quickly, price gaps widened and liquidity became even more fragmented.

Platform Issues and Compensation Plan

Binance admitted two platform-specific events during the crash but stated that neither caused broader market volatility.

The first event involved a slowdown in internal asset transfer systems between 21:18 and 21:51 UTC, impacting transfers between spot, finance, and futures accounts. The core trading systems remained running, but some users temporarily saw zero balance displays due to backend timeouts. Binance said the issue was caused by database performance regression under surging traffic, has since been resolved, and affected users have been compensated.

The second event concerned a temporary index deviation in USDe, WBETH, and BNSOL between 21:36 and 22:15 UTC, which occurred after most of the liquidations were already completed. Binance said thin liquidity and delayed cross-exchange rebalancing led to disproportionate local price swings affecting index calculations. The exchange has since adjusted its methodology, and impacted users have been compensated.

Binance emphasized that about 75% of liquidations happened before the index deviation that day, indicating that the initial macro shock was the major driver. The exchange said it has compensated users a total of over $328 million and launched additional support programs to stabilize participants affected by the crash. After the crash, total compensation to customers and businesses reached about $600 million.

Changpeng Zhao Denies Platform Responsibility

On Friday, Changpeng Zhao stated in a live Q&A on Binance’s social platform that ongoing claims that Binance was mainly responsible for last October’s crypto market crash are “far-fetched.” He denied that Binance was the key driver of the record liquidation wave and said users who suffered losses due to platform system issues during the October crash have been compensated.

Zhao stepped down as CEO in November 2023 as part of a settlement with US authorities, admitting failure to maintain an effective anti-money laundering program. Parent company Binance Holdings agreed to appoint an independent external compliance monitor. Zhao was pardoned by Trump last October.

Zhao said that some people still claim the crash was caused by Binance and want the platform to “compensate for everything.” He emphasized that Binance is a regulated company in Abu Dhabi and that authorities can access its activities. The US government continues to monitor the platform. According to Bloomberg last September, Binance was close to reaching a potential agreement with the US Department of Justice, which would allow it to give up supervision requirements.

Star Xu: “It Was Binance’s Irresponsibility”

After Zhao’s Friday statement, accusations about Binance’s role in the market crash continued. Star Xu posted on X, saying, “As the largest global platform, Binance, as the industry leader, has massive influence and corresponding responsibility.”

In his post on Friday, Xu wrote, “No complexity, no surprises. October 10 was caused by irresponsible marketing activity of certain companies.” He blamed Binance’s September launch of a high-yield product linked to the USDe stablecoin for triggering the chain reaction of liquidations. The product allowed users to earn a 12% APY during the promotional period using Ethena Labs’ USDe stablecoin as collateral.

Xu claimed the product carried “hedge fund-level risk.” He argued traders didn’t understand the risks of borrowing and levering up with USDe as collateral, falling into a “leverage loop.” He claimed “even a small market shock was enough to trigger a collapse,” and when “volatility hit, USDe rapidly depegged,” leading to the liquidation event. Xu stated:

“The damage to global users and companies (including OKX customers) is severe, and recovery will take time.”

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