Crypto Exchange CEOs Still Fighting Over October's $19B Crash

$19.16 billion vanished in a single day. Four months after crypto's worst flash crash, the industry's top executives are still publicly brawling over who's to blame.

OKX founder and CEO Star Xu fired the latest salvo Saturday, claiming October 10's massacre wasn't complicated or accidental—it was the predictable result of irresponsible marketing that pushed traders into leverage loops they didn't understand.

His target? Binance and its promotion of Ethena's yield-bearing USDe token, which Xu described as "closer to a tokenized hedge fund strategy than a plain stablecoin." The problem, he argued, wasn't the product itself but how it was sold to users as if it were cash.

The Leverage Loop Trap

"Binance users were encouraged to convert USDT and USDC into USDe to earn attractive yields, without sufficient emphasis on the underlying risks," Xu said. From a user's perspective, trading with USDe looked no different from using traditional stablecoins—but the risk profile was materially higher.

Here's how the trap worked: Users swapped stablecoins for USDe to capture yields, then used USDe as collateral to borrow more stablecoins, converted those into USDe again, and repeated the cycle. This created what Xu called a "self-feeding leverage machine" that made yields look safer than they actually were.

When Trump's tariff escalation rattled macro markets on October 10, this structure didn't need a big trigger to unwind. The cascade helped turn what might have been a manageable selloff into a $16 billion long position wipeout.

The Pushback

Dragonfly partner Haseeb Qureshi called Xu's narrative "candidly ridiculous," arguing it tries to force a clean villain onto an event that doesn't fit simple explanations. His key point: If USDe failure truly drove the crash, the stress should have appeared everywhere at once.

"USDe price diverged ONLY on Binance, it did not diverge on other venues," Qureshi tweeted. "But the liquidation spiral was happening everywhere. So if the USDe 'depeg' did not propagate across the market, it can't explain how every single exchange saw huge wipeouts."

Qureshi's alternative story is straightforward: Macro headlines spooked an already overleveraged market. As liquidity vanished, forced selling became reflexive—driving prices lower, triggering more forced selling, with few natural buyers willing to step in during chaos.

Binance itself attributed the crash to macro-driven selloffs colliding with heavy leverage and vanishing liquidity, rejecting claims of core trading-system failures.

What Really Broke?

The fascinating aspect of this public spat is that both sides acknowledge key facts. The market was overleveraged. Liquidity was thin. Macro shocks provided the trigger. The disagreement centers on whether specific products amplified the damage or whether broader market structure was the real culprit.

Xu conceded that "BTC began declining roughly 30 minutes before the USDe depeg," supporting the view that initial moves were market-driven. But he maintained that "absent the USDe leverage loop, the market would likely have stabilized at that point."

The debate matters because it shapes how the industry thinks about risk management going forward. Are complex yield products inherently dangerous when marketed to retail users? Or are they just another tool that becomes problematic only when leverage gets excessive across the entire system?

The Broader Picture

This isn't just crypto drama—it reflects a fundamental tension in modern finance. As traditional and digital markets converge, the line between "safe" and "risky" products increasingly depends on how they're packaged and sold rather than their underlying mechanics.

The October crash left lasting damage across exchanges and users, with many participants believing it was more severe than the FTX collapse. That assessment speaks to how interconnected crypto markets have become and how quickly problems can propagate when leverage unwinds.

For traders and investors, the lesson isn't about avoiding specific tokens or exchanges—it's about understanding that yield doesn't come from nowhere, and structures that seem simple often hide complex risks.