Author: Conflux
On October 11, 2025, roughly $19 billion in leveraged positions were liquidated in a single day—the largest in the crypto industry's recorded history.
A year later, the shadow of that event has not lifted, and the public-opinion war surrounding it has continued on and off. On October 12, OKX CEO Star Xu pulled up an interview with Changpeng Zhao (CZ) and asked, "Who is the Yue Buqun of crypto?" (the hypocrite in Jin Yong's novels). In that interview, CZ said that Binance's payout of about $800 million to compensate users was a voluntary act, not an obligation.
What that money compensated for, and how large the uncompensated portion was, is a question no one has given a complete answer to over the past year.
The war of words sparked by $800 million
On October 12, a passage from a recent interview with CZ sparked discussion. He made three points: Binance compensated affected users about $800 million, and the platform had no obligation to pay; the outside world always focuses on negative news about Binance, but during the controversy Binance still saw net capital inflows; and community opinion may be manipulated, with capital flows reflecting the real situation better than volume of noise.
Xu posted a series of rebuttals on X that day. He did not accept framing the compensation as voluntary: that crash caused tens of billions of dollars in losses across the entire market, and this money should not become a reason for self-congratulation. He traced responsibility back to Binance's promotion of a high-yield USDe product in September.
Binance co-founder Yi He subsequently posted a response. She said that Binance's later "Together Plan" used its own money, and implicitly suggested that some platforms run their business by wicking the system and, when trouble hits, shift the blame to Binance, and that peers have manipulated the media and manufactured fake news for years. On October 13, CZ also posted a message without naming names: paying to spread FUD (fear, uncertainty, and doubt) to smear competitors only damages trust in one's own exchange.
Cathie Wood lights the fuse, Xu escalates
This debate traces back to January.
On January 26, 2026, ARK Invest CEO Cathie Wood (known as "Wood Sister") gave an interview to Fox Business. Discussing bitcoin's trajectory over the past few months, she traced the source to 1011: what the crypto market endured over those two to three months was the aftershock of that flash crash, which was related to a software malfunction at Binance, with the system undergoing passive deleveraging on a scale of about $28 billion (the commonly cited market figure is $19 billion), and many people were hurt.
She also explained why bitcoin was hit hardest: it is the most liquid asset, and when leverage is liquidated on a massive scale, the deepest market is hit first. Her overall judgment was actually optimistic, believing that deleveraging was largely over and that bitcoin could bottom in the $80,000 to $90,000 range. The reliability of infrastructure is an unavoidable concern for professional investors considering long-term allocation, including through ARK's spot bitcoin ETF (ARKB).
This was the first time a well-known figure from traditional finance explicitly pointed the finger at Binance in mainstream media.
Emotions that had accumulated for more than three months found an outlet. Starting January 28, KOLs and traders in the English-speaking world concentrated their criticism on Binance and CZ, questioning system stability, risk-control capability, and knock-on effects, with many calling CZ a "fraudster" and saying his persona had collapsed.
On January 30, CZ said in an AMA that 1011 was not caused by a Binance system problem, that affected users had already been compensated, and that the recent flood of criticism was organized by competitors hiring trolls. On the same day, Binance announced it would convert its $1 billion user protection fund SAFU from stablecoins into bitcoin within 30 days.
Binance's post-mortem report on 1011 attributed the crash to a combination of factors: when Trump announced 100% tariffs on Chinese goods, bitcoin derivatives open interest had already exceeded $100 billion, market makers withdrew depth, and the Ethereum chain was congested, triggering cascading liquidations; about 75% of liquidations occurred before the index deviation in three assets.
On the same day, Xu publicly named Binance for the first time, saying 1011 was not an accident but was caused by Binance's September marketing of a high-yield USDe product. During the promotion period the annualized rate was about 12%, users borrowed against USDe collateral and added positions, forming a leverage loop, and once USDe depegged, liquidations cascaded. He called the product hedge-fund-level risk.
Some in the industry disagreed with his account: Ethena founder Guy Young said there had never been any special auto-deleveraging (ADL) arrangement with the exchange; Dragonfly managing partner Haseeb Qureshi argued that "Binance and Ethena caused the crash" does not hold up on timeline or transmission path; and Wintermute founder Evgeny Gaevoy judged it a macro-driven flash crash. Xu is a competitor, so his words should be read with a discount.
On February 27, an X page showed that CZ had unfollowed Cathie Wood. In May, the two held a podcast conversation, and Wood clarified her January statement to his face: Binance did not trigger that flash crash; the malfunction appeared only after the plunge, and combined with tariff-induced panic, the market's fragility was amplified. She did not deny the malfunction; what she changed was the causality—the malfunction was the result of the plunge, not the cause. CZ responded that the passage had been widely cited by the media, leading many to say Binance caused the crash, and that he was glad she had now clarified.
Where the compensation line is drawn
However causality is calculated, Binance's own compensation rules contain a ready-made line.
The first $283 million Binance distributed went to users who were forcibly liquidated because USDe, BNSOL, and WBETH depegged. The report's explanation for these three assets was that index prices relied excessively on Binance's own order book, were not sufficiently anchored to the underlying asset prices, and that outlier protection mechanisms were not strict enough when liquidity was thin. USDe once fell to about $0.65 on Binance.
The rules draw the line around this window: users who held these three assets as collateral and were forcibly liquidated between 05:36 and 06:16 on October 11 would be compensated for the difference between the liquidation price and the market price at 8 a.m. on October 11, with fees refunded. Losses caused purely by market volatility and unrealized profits would not be compensated.
Back to that 75%: most liquidations occurred before the window and fall outside the compensation scope. Under this standard, how much is paid depends on which segment Binance determines to be its own problem; the first half, which accounted for the bulk of liquidations, was classified as market behavior.
Who received the money
Binance's compensation was divided into several parts:
More than $328 million: compensation to users affected by degraded performance of the asset transfer subsystem and to users forcibly liquidated due to the depegging of the three assets
The $400 million "Together Plan" consisted of two parts:
$300 million "User Seed Program": USDC distributed to some affected users, with amounts comprehensively assessed based on loss situation and ratio, randomly ranging from 4 to 6,000 USDC. The conditions were: contracts or leverage forcibly liquidated between 08:00 on October 10 and 07:59 on October 12, losses of at least $50, and liquidation losses accounting for more than 30% of account net assets (net assets based on the snapshot at 07:59 on October 10); users who had already received the previous compensation were no longer eligible
$100 million low-interest loan: aimed at hard-hit institutions and ecosystem traders; it is a loan and must be repaid
Together these add up to more than $728 million, of which $100 million is a loan to be repaid.
The seed program gave each person at most 6,000 USDC. X user @puregamm was very dissatisfied with this: one of his accounts at Binance was liquidated, with an amount exceeding $4 million. He questioned that users whose collateral assets depegged received compensation, while contract users received only USDC on the order of a few thousand dollars. He also posted that he and other market makers lost millions of dollars due to Binance API order failures.
That post was later deleted. He explained that Binance's technical team gave him complete logs showing that the reduce-position order never returned a 503 error. Some therefore suspected that Binance had privately given him benefits in exchange for deleting the post. He denied it, saying he only received the standard one-time compensation under the "Together Plan."
Cases involving formal complaints followed a separate track: Yi He said on X on October 11 that for losses caused by Binance's reasons, users should contact customer service to register, and a ruling would be made after checking account behavior. Binance has never publicly disclosed the rulings in such individual cases.
A claim thus circulated externally: Binance privately negotiated compensation with KOLs, and those compensated were not allowed to speak out on X.
CZ said this round of criticism was organized by competitors, and that "community narratives can be bought"; when responding to Xu, Yi He also said peers had manipulated the media and manufactured fake news for years. Both sides accuse the other of manipulating public opinion.As for where the compensation money came from, that is the starting point for another line of speculation.
The Accounts Behind Taking Over Positions
Around the "1011 crash," there has long been speculation in the market: that Binance took over some liquidated positions during extreme market conditions, profited from them after the market rebounded, and then used that money to compensate users.
To judge this matter, one must first clarify whether exchanges really have a mechanism to take over bankrupt positions and bear their subsequent profits and losses.
According to Binance's publicly disclosed contract liquidation rules, when forced liquidation orders cannot be fully filled and the remaining positions enter a bankrupt state, the contract insurance fund may take over the positions within a certain range, with the relevant losses borne by the insurance fund; if the positions generate profits, the gains also go into the fund. If the fund is insufficient to cover the relevant risks, ADL may be triggered.
This shows that taking over bankrupt positions is not a groundless speculation.
The liquidation data itself also has statistical limitations. In October 2025, Hyperliquid founder Jeff Yan pointed out that Binance's public API pushes only the latest liquidation order per trading pair per second. When liquidations erupt in concentrated fashion, public data may be far lower than the actual number of liquidations that occurred, and he believed the underestimation could in some cases reach 100 times.
This claim reminds the outside world that public liquidation data may not fully reconstruct the scale of the incident, but it cannot prove how many positions Binance concealed, still less explain how much profit the platform made from those positions.
In a January 2026 AMA, CZ denied that Binance or he himself manipulated prices through trading or profited from the crash, and said Binance had already compensated users affected by platform issues. This is Binance's public response, but it still cannot replace verification of the actual positions and fund flows.
Still Unknown After the One-Year Anniversary
One year after the "1011 crash," the debate among CZ, Xu Mingxing, and He Yi continues.
Binance acknowledged some platform issues and announced compensation and user support plans; it also emphasized that the macro shock and market-wide deleveraging were the main causes of the crash. Xu Mingxing questioned whether high-yield products, collateral settings, and risk management may have amplified losses.
Both sides' claims require specific evidence.
To judge how much responsibility Binance should bear, it is necessary to separately account for macro market losses, additional losses caused by platform failures, and the impact of product risk design. The compensation amount can show how much money the platform put forward, but it cannot by itself prove the extent of responsibility; the total market liquidation scale also cannot directly prove how much a single exchange should bear.
What is more worth asking is: when an exchange controls the order book, index prices, and liquidation data, and also controls the interpretation of compensation standards, on what basis can users actually verify their own losses?
If another extreme market event occurs, and users believe platform failures worsened their losses, can they demand an explanation based on a set of public, verifiable rules, or can they only wait for the exchange to decide on its own which losses are worth compensating?
*The content of this article is for reference only and does not constitute any investment advice. Markets carry risks, and investment requires caution.