Wintermute founder says Binance wasn’t at fault in October flash crash

Wintermute founder Evgeny Gaevoy dismissed claims that Binance caused the October 10 crypto market crash, calling attempts to blame a single exchange “intellectually dishonest.”

Writing on X, Gaevoy called the event as “a flash crash on mega leveraged market on illiquid Friday night driven by macro news” rather than platform-specific failures.

The comments responded to OKX CEO Star Xu’s criticism that Binance irresponsibly marketed USDe with 12% yields while allowing the token to serve as collateral without proper risk warnings.

Tens of billions of dollars were liquidated during the October 10 event, which Xu claimed fundamentally changed crypto market microstructure.

Gaevoy countered that “finding a scapegoat is comfy” during bear markets but does not address underlying market conditions.

Macro conditions triggered leveraged position unwind

Gaevoy rejected characterizations of October 10 as a “software glitch,” stating the crash resulted from macro news hitting an overleveraged market during illiquid trading hours.

The Friday night timing amplified volatility as fewer market makers provided liquidity to absorb selling pressure.

“I get that nobody likes being in bear market, watching every single asset class besides crypto going up,” Gaevoy wrote.

Gaevoy urged “public figures would pick words more carefully” when discussing the crash. His pushback came as multiple industry leaders debated causes of the liquidation that some participants compared to FTX’s collapse in severity.

The October event followed announcement of 100% tariffs on China by the United States. The macro catalyst caused liquidations across leveraged positions, with total crypto market capitalization falling 23.7% in Q4 2025 according to CoinGecko data.

Star Xu details USDe leverage loop mechanics

OKX CEO Star Xu provided detailed mechanics of how Binance’s USDe promotion created systemic risk.

Users converted USDT and USDC into USDe to earn 12% yields, then used USDe as collateral to borrow USDT, converted borrowed funds back into USDe, and repeated the cycle.

The leverage loop produced artificial APYs reaching 24%, 36%, and exceeding 70%, which users perceived as low risk because a major platform offered the yields. “Systemic risk accumulated quickly across the global crypto market,” Xu wrote.

USDe differs fundamentally from tokenized money market funds like BlackRock BUIDL and Franklin Templeton BENJI, Xu argued.

When volatility hit, USDe depegged quickly. Cascading liquidations followed, with weaknesses in risk management around assets like WETH and BNSOL amplifying the crash. Some tokens briefly traded near zero.

“I am discussing the root cause, not assigning blame or launching an attack on Binance,” Xu stated.