Binance, the world’s largest cryptocurrency exchange, has denied a report published by Forbes titled “Binance’s Asset Shuffling Eerily Similar to Maneuvers By FTX,” which argues that the crypto giant transferred $1.8 billion associated with its users’ funds.
According to Forbes, between August 17 and early December 2022, Binance “quietly moved” $1.8 billion deposited “as collateral intended to back its customers’ stablecoins,” leaving many of its users with unsecured funds.
This was despite the company’s claim that it had fully audited its bookings and never touched its customers’ deposits.
What Forbes Says
Forbes alleges that $1.1 billion of funds extracted from customers in USDC tokens, the stablecoin issued by Circle, were sent to Cumberland/DWR, a Chicago-based high-frequency trading firm. Forbes reports that the company “may have assisted Binance in its efforts to turn 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 have received hundreds of millions of dollars in funds from Binance.
“According to blockchain data examined by Forbes, from August 17th to early December – around the same time as FTX was imploding – holders of over $1 billion worth of crypto known as B-tokens peg USDC became unsecured for instruments that Binance claimed are 100% backed by whatever token they are pegged to.”
Forbes suggests that the way Binance handled its clients’ funds mimicked the maneuvers employed by FTX prior to filing for bankruptcy. US investigators claim that FTX sent money to Alameda Research, even though doing so was prohibited.
The article states that just because Binance is not regulated like a standard financial company, it automatically means that its transactions are illegal. However, it makes it easier for regulators to require regulated companies to separate from custodians of their clients’ assets.
Binance responds to Forbes’ allegations.
Binance has responded to Forbes’ allegations about the misuse of user funds, denying any wrongdoing. The company’s spokesman assured that the transactions in question were part of its internal billing processes and did not affect the guarantee of user assets.
“While Binance has previously acknowledged that the portfolio management processes for securing a pegged token on Binance have not always been perfect, at no point has the user asset security been affected. The processes for managing our collateral portfolios have been corrected over the long term and this is verifiable across the chain.”
Later, Binance CSO Patrick Hillman explained that capital movements between wallets were normal and that the exchange does not mix its assets with customer funds. He invited interested parties to verify the veracity of their claims against public blockchain records.
Binance’s efforts to counteract the effects of bad publicity are not superficial. The bag was involved in several situations that tarnished its image. From the CEO of FTX accusing Binance CEO from orchestrating its stock market crash to an uproar caused by the confirmation that, on previous occasions, Binance had failed to back up its stablecoin BUSD by as much as $1 billion.
And furthermore, the stablecoin itself is currently under the microscope of regulators. Paxos stopped creating 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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