Binance has renewed its defense over the October 11, 2025 “1011 flash crash,” rejecting claims that a software malfunction on its platform caused the market collapse. The dispute has flared up again after Ark Invest CEO Cathie Wood and OKX CEO Star publicly pointed to Binance while discussing what triggered one of crypto’s largest deleveraging events.
The sell-off unfolded between October 10 and 11, 2025, during a broader bout of financial turmoil. According to the source material, U.S. President Donald Trump threatened another round of 100% tariffs on China, deepening trade tensions and hitting traditional markets first. Roughly $1.5 trillion in U.S. equity value was wiped out in a single day, while the S&P 500 and Nasdaq posted their steepest one-day losses in nearly six months. In crypto, where leverage was already stretched, Bitcoin dropped $12,000 within minutes, or nearly 10%, and came close to losing the $100,000 level.
More than $19 billion in liquidations in 24 hours
The market fallout was severe. Over $19 billion in leveraged positions were liquidated across exchanges in 24 hours, making it the biggest single-day washout in crypto history by the source’s account. More than 16,000 trading accounts were completely wiped out. Bitcoin eventually fell as much as 14%, altcoins dropped harder, and the total crypto market capitalization slid by more than 20% to around $3.2 trillion.
Conditions were fragile even before the collapse. Bitcoin derivatives open interest had climbed above $100 billion, near historical highs, while on-chain data showed that most holders were sitting on profits. Once selling accelerated, market makers pulled liquidity as part of their risk controls, leaving order books thin. At the same time, congestion on Ethereum pushed gas fees above 100 gwei, slowing transfers and arbitrage activity and making price dislocations worse.
USDe depeg becomes a focal point
One of the sharpest points of criticism centered on USDe and other stable-value assets traded on Binance. USDe briefly fell to $0.65 before rebounding. Critics argued that the dislocation was tied to Binance’s promotion of USDe as a high-yield collateral asset, a structure they say may have intensified cascading liquidations.
In an X post published on January 31, OKX CEO Star said the event reflected irresponsible marketing by some companies. He pointed to Binance’s promotion of a USDe product offering a 12% annual yield and argued that treating it like collateral on par with USDT encouraged a risky leverage loop: converting USDT into USDe, borrowing more, and repeating the cycle. In his description, that structure pushed synthetic returns as high as 70% while downplaying the hedge-fund-level risks embedded in Ethena’s product. He also said weaknesses in risk management around assets including WETH and BNSOL amplified the crash, with some tokens at one point nearly going to zero.
Cathie Wood says a Binance software issue triggered forced deleveraging
Cathie Wood took an even sharper line. In a January 26 interview with Fox Business, she described the episode as a “forced deleveraging event” that erased about $28 billion from the system. Wood said a software fault on Binance artificially triggered the deleveraging process and argued that the damage to confidence has made it harder for the market to revisit prior highs. In her words, the flash crash on October 10 “had to do with a software glitch at Binance, and it deleveraged the system.”
Star, while highly critical of the setup around USDe, said he was addressing root causes rather than simply attacking Binance. He wrote that discussing systemic risk in public can be uncomfortable, but that the industry needs to do it if it wants to mature responsibly.
Binance says core systems stayed online throughout the turmoil
Binance has held its line. In a January 31 blog post, the exchange said the main drivers of the October 11 turmoil were macroeconomic shock, market-maker risk controls, and Ethereum network congestion, not a breakdown in its core trading infrastructure. The company said its core matching, risk checks, and liquidation functions remained stable the entire time and that there was no full-platform outage.
Binance did acknowledge two issues. Asset transfers slowed for 33 minutes because of heavy traffic, and temporary index deviations appeared in USDe, WBETH, and BNSOL during a period of weak liquidity and on-chain delay. Still, Binance said those issues did not cause the flash crash and stressed that 75% of all liquidations had already happened before they appeared.
The exchange said it compensated eligible users affected between 05:18 and 05:51 Beijing time based on system logs and operating records. It also said it increased cache capacity, expanded database resources and replicas, optimized connection management, separated key functions, and improved front-end display mechanisms. During the later stabilization phase, it tightened parameters and began updating the design of USDe, WBETH, and BNSOL.
Compensation figures and CZ’s response keep the argument alive
As of October 22, 2025, Binance said it had paid more than $328 million in compensation to affected users. It also launched a $300 million industry recovery fund called the “Together We Thrive Program” and offered $100 million in low-interest loans to ecosystem participants. In its earlier statement, Binance had already said the event was driven by broader market conditions rather than faults on its platform.
In a recent AMA, former Binance chief Changpeng Zhao dismissed the allegations as “distorted FUD.” He said it was too simplistic to pin a complex market event on a single platform and repeated that Binance had compensated users. Zhao urged attention on the industry’s long-term development instead of mutual blame. Responding to criticism linked to the crash and token listings, he said, “Coordinated attacks cannot build this space.”