Binance admits to mixing customer funds with company collateral

According to data displayed on Binance’s web on January 23, 94 B-Tokens (BNB Chain versions of popular tokens such as MATIC, UNI, DAI, MKR, AAVE, ..) a single wallet named “Binance 8”. This wallet holds significantly more reserve tokens than the number of B-Tokens that Binance has issued.

This shows that collateral is being mixed with customer funds rather than being stored separately, as has been done for other Binance fixed tokens according to the company’s own guidelines.

In an interview with Bloomberg, a representative of Binance admitted that the platform had mixed user deposits with collateral for B-Tokens, saying this was an “error”.

This representative said: “Binance 8 is a cold wallet of the exchange. In the past, there was an error that led to the collateral being transferred here and mentioned on the list of escrow addresses for B-Token. Binance is aware of this error and is in the process of transferring the assets to a separate wallet.”

However, it is not clear when exactly the exchange detected the mixing of funds and how long this situation has happened. A spokesperson for Binance stated that the exchange still guarantees a 1:1 holding of users’ assets.

According to Bloomberg, there are currently more than 40 B-Token coins kept as collateral in the Binance 8 wallet. The amount of collateral value for B-Token is up to 539 million USD, accounting for nearly a third of total assets 1, $8 billion is being held by Binance.

Since November 2022 when the FTX “catastrophe” occurred, crypto exchanges like Binance are required to be transparent about their assets. This time, Binance announced its crypto wallets in an effort to increase transparency and reassure users.

However, many blockchain researchers have pointed out an anomaly related to the Binance 8 wallet. Accordingly, this wallet has just been confirmed to store customers’ funds, but is also listed in the list of secured wallets. Cryptocurrency assets issued by Binance such as BUSD or B-Token.

In December 2022, Binance was constantly entangled in many controversies, causing investors to lose confidence in the world’s largest cryptocurrency exchange and massively withdraw money from the exchange.

Crypto data company Nansen said that in the first week of December, Binance lost $3 billion, or about 4% of total company assets at the time. However, according to Forbes, Binance actually lost 15% of its assets at the time, meaning that $12 billion of Binance’s reserves evaporated in less than two months.

In the first month of 2023, Binance was also found to have many suspicious signs related to the listing of new tokens when a wallet address was found to have repeatedly bought and sold tokens that were about to be opened for trading on the exchange. floor.

Binance has announced the listing and opening of RPL (Rocket Pool) trading from the afternoon of January 18. As soon as it was listed on the exchange, RPL peaked at $42.9 before falling to $31.65. According to Wu Blockchain, an anonymous wallet address purchased around 6,200 RPL 10 minutes before Binance announced the listing of the token. After that, this person sold out all the RPL and earned $ 55,400.

It was this activity that raised suspicions about insider trading taking place on the Binance exchange. Because previously, CEO Changpeng Zhao himself emphasized the exchange’s employee restriction policy, requiring Binance employees to hold a coin for at least 90 days before being allowed to sell.

In addition, Binance also admitted that there was a problem with the guarantee of stablecoin BUSD, but it was resolved.

A Binance representative said: ” The process of maintaining the peg (guaranteeing 1 BUSD – 1 USD) requires the coordination of many teams and is not always perfect. This has caused many delays in the past. Recently, this process has improved significantly, the exchange has regularly advanced checks to ensure that BUSD is always 1:1 “.

Reference: Bloomberg