OKX CEO Accuses Binance of Fueling Leverage Cycle Behind 2025 Crypto Flash Crash

The sustained downturn in the crypto market and the October 10, 2025 flash crash have reignited tensions between major exchanges, after OKX CEO Star Xu publicly accused Binance of creating systemic risk through what he described as “irresponsible marketing” and excessive leverage promotion.

Xu characterized the October event, which triggered roughly $19 billion in liquidations, as a “man-made crisis”, arguing that it was not merely the result of macro volatility, but the outcome of a leverage cycle amplified by Binance’s handling and promotion of Ethena’s USDe product.

Allegations of a Leverage-Driven Feedback Loop

At the core of Xu’s critique is Binance’s high-yield campaign tied to USDe, a synthetic dollar product.

According to Xu, Binance marketed USDe with an advertised 12% APY, framing it as a stable, low-risk yield opportunity comparable to traditional stablecoins such as USDT or USDC.

Xu claims this messaging encouraged users to deploy USDe in aggressive leverage strategies. He alleged that Binance allowed USDe to be treated as near-cash collateral, enabling traders to deposit USDe, borrow USDT against it, and repeatedly loop the process to amplify exposure. In extreme cases, Xu stated, these strategies produced headline yields exceeding 70%.

He further argued that USDe should not be viewed as a conventional stablecoin, describing it instead as a “tokenized hedge fund product” whose stability depends on market conditions and active hedging. When prices moved sharply lower, this structure allegedly unraveled, causing USDe to temporarily depeg and accelerating forced liquidations across derivatives markets.

Binance Pushes Back on Responsibility

Binance and its founder Changpeng Zhao rejected Xu’s accusations, disputing both the causal link and the timeline presented by OKX’s CEO.

According to Binance, internal data shows that Bitcoin reached its local bottom between 21:20 and 21:21 UTC, while the USDe depeg occurred later, after 21:36 UTC. Binance argues this sequence demonstrates that the market crash was already in motion before any instability in USDe emerged.

The exchange instead pointed to broader external pressures, including renewed U.S. tariff threats and extremely thin liquidity during a Friday night trading window, as the primary catalysts behind the sharp sell-off.

Aftermath and Ongoing Dispute

While denying responsibility for triggering the crash, Binance acknowledged that certain technical issues affected some users during the extreme volatility. The exchange stated it has distributed more than $328 million in compensation related to balance discrepancies and other disruptions.

The public dispute highlights a deeper industry divide over leverage, yield products, and exchange responsibility during periods of market stress. As regulators continue to scrutinize synthetic dollar products and high-yield crypto instruments, the October 2025 flash crash remains a reference point in the debate over how much risk is embedded in modern crypto market structures, and who should ultimately bear responsibility when those risks unwind.

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