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Binance responds to allegations of moving billions in customer funds

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Binance responds to allegations of moving billions in customer funds

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  • As per a Forbes report, the corporation allegedly moved $1.8 billion in assets belonging to its customers.
  • Moving money across wallets is common and poses no problems, according to Binance’s CSO.

The biggest cryptocurrency exchange in the world, Binance, has refuted a Forbes article alleging that the company shifted $1.8 billion related to its users’ assets.

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

According to Patrick Hillman, chief strategy officer of Binance, moving money across wallets is normal and not an issue. Because “there are wallets and a ledger,” Hillman claimed, “there was no mixing.”

The allegations against Binance

Forbes stated that USD Coin [USDC] tokens, the stablecoin created by Circle, were used to steal $1.1 billion from clients and send it to Cumberland/DWR, a high-frequency trading firm based in Chicago. To convert the collateral into its own Binance Dollar [BUSD] stablecoin, the corporation “may have supported Binance in its efforts.”

According to Forbes, Binance provided hundreds of millions of dollars in funding to other significant players in the cryptocurrency ecosystem. This included Justin Sun’s TRON [TRX], Sam Bankman-Fried’s Alameda Research, and the Amber Group. They stated:

“According to blockchain data examined by Forbes, from August 17 to early December–about the same time FTX was imploding–holders of more than $1 billion of crypto known as B-peg USDC tokens were left with no collateral for instruments that Binance claimed would be 100% backed by whichever token they were pegged to.”

Forbes claimed that Binance imitated FTX’s pre-bankruptcy moves by similarly manipulating its clients’ money. According to US authorities, FTX allegedly paid money to Alameda Research despite it being against the law.

The exchange’s response

In response to Forbes’ charges of improper handling of user funds, Binance said there had been no misconduct. The company’s spokesman confirmed that the in-question transactions were a part of their internal billing procedures. Moreover, they had no bearing on the collaterization of user assets. The firm stated:

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

The actions taken by Binance to mitigate the effects of the negative press are not insignificant. The exchange has been involved in several circumstances that have damaged its reputation. Notably, the CEO of FTX accused the CEO of Binance of planning the demise of his exchange, and there was controversy when Binance failed to collateralize its BUSD stablecoin by up to $1 billion.

After years in which reserves were combined with customer funds and at least one significant stablecoin, Binance-peg BUSD was not always completely supported. Binance recently announced it was switching to a semi-automated procedure for managing the reserves of its tokens.

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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