Binance Exploit Theory Links $1B Loss to Margin System Flaw

• Analyst links Binance crash to targeted exploit in unified margin system.
• USDe, BNSOL, WBETH depeg triggers large-scale forced liquidations.
• $1B loss highlights need for stronger exchange risk controls.

The sudden market downturn that shook the crypto market this week may have been the result of a coordinated attack directed at Binance, according to Forgiven, an executive from the Conflux (CFX) network. 

In a post shared on X, the executive alleged that the incident exposed structural flaws that allowed cascading liquidations across major trading pairs.

Related: CoinGlass Accuses Binance of Underreporting Liquidations in Trump-Induced Crypto Crash

How the Exploit Hit Binance’s Margin System

Forgiven explained that Binance’s architecture lets traders use a mix of collateral, from USD- and coin-margined contracts to staking derivatives and stablecoin-linked tokens, all under one umbrella account.

That flexibility turned risky when markets swung violently. As USDe, BNSOL, and WBETH lost their pegs, the collateral values collapsed, triggering forced liquidations across retail and institutional positions.

Depegs Trigger Chain Liquidations

Binance data showed USDe fell to $0.65 on the exchange versus $0.90 elsewhere. WBETH dropped to $0.20, and BNSOL crashed to $0.13, wiping out leveraged accounts.

Because margin values were tied to live spot prices instead of fixed references, the losses compounded rapidly.

Forgiven noted that several altcoins plunged on Binance alone – a sign that a major market-maker’s hedged portfolio had been wiped out.

Loss Estimates and Structural Weakness

Trading volume for USDe, WBETH, and BNSOL reached $3.5 billion to $4 billion within 24 hours.

Forgiven estimated the resulting profit-and-loss swing at $0.5 to $1 billion. If Binance compensates users, its total payout could land in that range.

The crash also coincided with the exchange’s 12% USDe wealth-management program, which let users loop loans through lending products, magnifying exposure as collateral prices fell.

Call for Stronger Risk Controls

The Conflux executive said the event showed how financial innovation can outpace risk safeguards.

He urged Binance and other exchanges to rebuild liquidation logic and strengthen margin collateral checks before similar shocks spread through the market again.

“Unified systems are efficient until volatility turns them into contagion channels,” he warned.

Related: Crypto Markets Bleed as Trump Escalates Tariff War With China