- OKX CEO says Binance’s USDe yield campaign influenced market risk and helped trigger cascading liquidations.
- USDe was treated like a stablecoin despite higher risk, enabling leverage loops that amplified systemic exposure.
- Binance rejected the claims, saying it caused no forced liquidations and paid about $600M to affected users.
Months after one of crypto’s largest liquidation events, OKX CEO Star Xu has publicly criticized Binance over its role in the October 10 market crash. The incident wiped out roughly $19 billion in leveraged positions in a single day. Xu said Binance’s USDe yield campaign changed market structure and triggered cascading liquidations across global exchanges.
USDe Campaign and Collateral Design Under Scrutiny
In a detailed post on X, Xu said the crash stemmed from what he called irresponsible marketing practices. According to Xu, Binance promoted a short-term campaign offering about 12% APY on USDe on October 10. At the same time, Binance allowed USDe to function as collateral like USDT and USDC.
Xu described USDe, issued by Ethena, as a tokenized hedge fund product. He said it deploys user funds into arbitrage and algorithmic trading strategies. Notably, he contrasted USDe with tokenized money market funds like BlackRock’s BUIDL and Franklin Templeton’s BENJI, which he described as lower risk.
According to Xu, many users viewed USDe as equivalent to a stablecoin. However, he said its embedded risk profile differed significantly. As a result, large amounts of capital moved into USDe without sufficient risk awareness.
Leverage Loops Fueled Systemic Risk
Xu explained that risk escalated through repeated leverage cycles. Users converted USDT or USDC into USDe. They then used USDe as collateral to borrow more USDT. Afterward, they converted the borrowed funds back into USDe.
This loop produced reported yields of 24%, 36%, and even above 70%, Xu said. As a result, systemic risk accumulated rapidly across the crypto market. When volatility increased, USDe briefly lost its peg. That move triggered widespread liquidations, Xu added.
He said weaknesses in risk controls around assets such as WETH and BNSOL worsened the crash. Some tokens briefly traded near zero, according to Xu. He also claimed the damage exceeded the impact of the FTX collapse in some respects.
Binance and CZ Reject the Claims
Binance co-founder Changpeng Zhao has rejected Xu’s allegations. Speaking during a question-and-answer session, Zhao described claims blaming Binance as far-fetched, according to Bloomberg. He said Binance did not cause forced liquidations.
Zhao added that Binance operates under regulatory oversight in Abu Dhabi. He also said the exchange compensated affected users. According to Zhao, payouts totaled about $600 million, including funds for retail and institutional clients.
