Binance Denies Misuse of $1.8B of User Funds

Binance, the world’s largest cryptocurrency exchange, has denied a report published by Forbes titled “Binance’s asset mix is ​​eerily similar to FTX’s maneuvering,” which argues that the cryptocurrency giant transferred $1.8 billion associated with the funds of its users.

According to Forbes, between August 17 and early December 2022, Binance “quietly” moved $1.8 billion deposited “as collateral intended to support its clients’ stablecoins,” leaving many of its users with unbacked funds.

This was despite the company’s claim that it had fully audited its reserves and never touched its customers’ deposits.

what forbes says

Forbes alleges that $1.1 billion of the funds drawn from clients in USDC tokens, the stablecoin issued by Circle, were sent to Cumberland/DWR, a Chicago-based high-frequency trading company. Forbes reports that the company “may have assisted Binance in its efforts to transform collateral into its own stablecoin Binance USD (BUSD).”

Forbes also claims that other relevant players in the crypto ecosystem, such as Amber Group, Sam Bankman-Fried’s Alameda Research, and Justin Sun’s Tron, received hundreds of millions of dollars in funding from Binance.

“According to blockchain data examined by Forbes, from August 17 through early December, around the same time that FTX was imploding, holders of more than $1 billion worth of cryptocurrencies known as B-peg USDC tokens were left without guarantee for the instruments that Binance claimed to be 100% backed by whatever token they are linked to.”

Forbes suggests that the way Binance handled its client funds mimicked the maneuvers employed by FTX before filing for bankruptcy. US investigators claim that FTX sent money to Alameda Research despite the fact that it was prohibited.

The article states that the fact that Binance is not regulated as a standard financial company automatically means that its transactions are illegal. However, it makes it easier for regulators to require regulated companies to separate themselves from custodians of their clients’ assets.

Binance responds to Forbes’ accusations.

Binance responded to Forbes’ allegations of mishandling user funds, denying any wrongdoing. The company spokesperson assured that the transactions in question were part of its internal billing processes and did not affect the guarantee of the users’ assets.

“While Binance previously acknowledged that the wallet management processes for Binance-pegged token collateral have not always been flawless, at no time was collateral for user assets affected. The processes for managing our collateral wallets have been fixed for the longer term and this is verifiable on-chain.”

Later, Binance CSO Patrick Hillman explained that capital movements between wallets were normal and the exchange does not mix its assets with customer funds. He invited interested parties to verify the veracity of his claims in public blockchain records.

Binance’s efforts to counter the effects of bad publicity are not superficial. The exchange has been involved in several situations that have tarnished her image. From the CEO of FTX accusing the CEO of Binance from orchestrating its exchange’s crash to an uproar caused by confirmation that Binance was unable to guarantee its stablecoin BUSD for up to $1 billion on previous occasions.

And beyond that, the stablecoin itself is currently under the microscope of regulators. Paxos stopped minting it after it was revealed that the SEC was investigating the company, and US exchanges are already watching their backs, with Coinbase taking the first step and delisting the token.


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