Key Highlights
- OKX CEO Star Xu blamed Binance’s USDe campaign for the October 10 $19B crypto market crash.
- Binance’s CZ rejected the claims, calling them “far-fetched” and noting full user compensation.
- The event highlights risks from high-yield tokens, leverage loops, and exchange-driven market incentives.
A public disagreement has emerged between the leadership of two of the world’s largest cryptocurrency exchanges over the causes of the massive market crash that hit the crypto industry last year on October 10–11.
Now months after the incident, OKX CEO Star Xu has openly criticized Binance’s actions which led to the crash, while Binance Co-Founder Changpeng Zhao (CZ) has firmly rejected the claims.
“On October 10, tens of billions of dollars were liquidated. As CEO of OKX, we observed clearly that the crypto market’s microstructure fundamentally changed after that day,” Xu said, emphasizing that it was Binance’s high APY USDe campaign that led to the market bloodbath.
The debate centers on one of the largest liquidation events in crypto history, when roughly $19 billion in leveraged positions were wiped out in a single day, triggering sharp price swings and exposing weaknesses in market structure and risk management across major platforms.
What triggered the market crash
In a detailed post on X, Xu explained the October 10 crash was not an accident or a complex market failure. Instead, he described it as the result of “irresponsible marketing campaigns by certain companies.”
Xu explained that Binance launched a short-term user acquisition campaign offering around 12% APY on USDe, a yield-bearing token created by Ethena. During the campaign, Binance allowed USDe to be used as collateral with the same treatment as traditional stablecoins like USDT and USDC, and without strict limits.
According to Xu, this design decision encouraged users to move large amounts of capital into USDe without fully understanding its risk profile.
Unlike tokenized money market funds such as BlackRock’s BUIDL or Franklin Templeton’s BENJI, Xu said USDe operates more like a tokenized hedge fund product, relying on arbitrage and algorithmic trading strategies that carry higher risk.
He added that many users viewed USDe as a stablecoin equivalent, even though it embedded significantly more volatility and leverage risk.
Leverage loops and systemic risk
Xu described how risk escalated rapidly as traders began looping leverage. Users converted USDT or USDC into USDe, used USDe as collateral to borrow more USDT, converted the borrowed funds back into USDe, and repeated the cycle.
“This leverage loop produced artificial APYs of 24%, 36%, and even 70%+, widely perceived as “low risk” simply because they were offered by a major platform,” Xu stated, “Systemic risk accumulated rapidly across the global crypto market.”
This structure created what appeared to be unusually high “low-risk” yields, sometimes exceeding 30% or even 70%, simply because they were offered by a major exchange.
When market volatility increased, USDe briefly lost its peg, triggering cascading liquidations across exchanges. Xu said weaknesses in risk controls around assets such as wrapped Ether and liquid staking tokens worsened the situation, causing some tokens to trade near zero during the panic.
He claimed the damage from the crash was, in some ways, more severe than the collapse of FTX, citing widespread losses for traders and crypto firms, including OKX customers.
CZ rejects allegations as “far-fetched”
When criticized, Changpeng Zhao has always denied claims over Binance having any involvement in causing the crash. Speaking during a question-and-answer session on Binance’s social media channels, Zhao described claims blaming Binance as “far-fetched,” according to Bloomberg.
Zhao said Binance did not trigger the forced liquidations and emphasized that the exchange operates under regulatory oversight in Abu Dhabi, with additional monitoring arrangements involving U.S. authorities.
He noted that regulators have the ability to review Binance’s systems and operations. Addressing platform issues during the crash, Zhao said Binance had already compensated affected users.
The exchange reportedly paid out around $600 million, including $300 million to retail traders and $100 million reserved for institutional clients facing liquidity stress.
Zhao also warned about coordinated online campaigns spreading misinformation, claiming some attacks were driven by paid actors attempting to damage Binance’s reputation.
Why the dispute matters for crypto markets
The dispute raises more general issues of market structure, leverage, and transparency in crypto trading. The October liquidation incident revealed the extent to which aggressive yield products and collateral policy can increase risk in volatile times.
The same issues arose during previous market crashes, such as the Terra-Luna crash in 2022 and the FTX crash later that year, which demonstrated how interconnected systems and leverage can amplify systemic shocks.
While Xu said he was not trying to attack Binance, he claimed that big platforms have a greater responsibility because they have the power to influence the actions of the market. Zhao, in his turn, insisted that Binance was responsible and adhered to the regulatory requirements.
Impact and what comes next
The controversy is expected to affect the design of yield products by exchanges, collateral regulations and marketing disclosures in the future.
The question of whether crypto platforms are neutral marketplaces or actively influence risk-taking behavior is increasingly being questioned by regulators and market participants.
With the crypto markets still expanding, the October crash is a lesson that high yields, leverage, and complex products may be associated with hidden risks. The response of exchanges can determine the investor trust and market stability in the future.
Also Read: Binance’s CZ in Talks With Governments on Tokenization
