Binance was accused of illegally transferring about $2 billion. The response refuted the rumours. Is it simply FUD or damage control?
Binance, the biggest cryptocurrency exchange in the world, refuted a Forbes story headlined “Binance’s Asset Shuffling Eerily Similar To Maneuvers By FTX,” which asserts that the exchange moved $1.8 billion in customer cash.
Forbes reports that between August 17 and the beginning of December 2022, Binance shifted $1.8 billion placed “as collateral to guarantee its clients’ stablecoins,” leaving many of its consumers with unsupported funds.
Notwithstanding the company’s assertion that it had thoroughly reviewed its reserves and never touched its customers’ funds, this was the case.
Forbes claims that $1.1 billion of the monies stolen from clients in Circle’s stablecoin, USDC tokens, were routed to Chicago high-frequency trading company Cumberland/DWR. According to Forbes, the business “may have supported Binance in its attempts to convert collateral into its own Binance Dollar (BUSD) stablecoin.”
Forbes also reports that other significant crypto ecosystems participants, like Amber Group, Sam Bankman-Fried’s Alameda Research, and Justin Sun’s Tron, got hundreds of millions of dollars from Binance.
Forbes claims that the manner in which Binance managed the finances of its customers resembled the strategies utilized by FTX prior to filing for bankruptcy. The US investigators assert that FTX illegally transferred funds to Alameda Research.
The paper claims that since Binance is not regulated as a typical financial institution, its activities are inevitably unlawful. It does, however, make it simpler for regulators to require that regulated enterprises separate themselves from their customers’ asset custodians.
Binance reacted to charges by Forbes that it mishandled user cash by denying any wrongdoing. The company’s representative guaranteed the collateralization of customer assets was unaffected by the transactions in the issue since they were part of their internal invoicing operations.
“Although Binance has admitted in the past that the wallet management methods for Binance-pegged token collateral have not always been faultless, the collateralization of user funds has never been compromised.” Our processes for maintaining collateral wallets have been made more permanent, and this can be verified on-chain.”
Afterwards, Patrick Hillman, the CSO of Binance, clarified that money transfers between wallets were typical and that the exchange did not mix its assets with customer monies. He encouraged interested parties to examine the truth of their assertions in the public blockchain ledger.
The efforts made by Binance to combat the consequences of negative publicity are not superficial. Many incidents involving the exchange have harmed its reputation. From the CEO of FTX accusing the CEO of Binance of arranging the failure of his exchange to the revelation that Binance had previously failed to collateralize its BUSD stablecoin by up to $1 billion, there has been an uproar.
Moreover, the stablecoin itself is now under regulatory scrutiny. Paxos ceased minting it once it became public that the SEC was investigating the company, and American exchanges are already on guard, with Coinbase taking the lead by delisting the coin.