Is Binance Misusing Customers' Funds?

Forbes has accused BinanceThere are many cryptocurrency exchanges and wallets that provide great features for trading and investment, but one of the main platforms is Binance. Founded by Changpeng Zhao, a developer who built a number of different investment tools, the platform has…Know more of the “backroom maneuver,” claiming the exchange transferred $1.78 billion in stablecoinStablecoins are a class of cryptocurrency that aims to provide price stability. A perceived drawback of cryptocurrency is price volatility. Value wildly spikes and falls, discouraging many people from adopting the virtual currency. Stablecoins were designed to address this issue,…Know more to hedge funds.

Forbes, yet again, investigated the on-chain activities of Binance and discovered that the exchange transferred $1.78 billion in users’ funds to various hedge funds. The article reveals that the Changpeng Zhao-led exchange completely emptied its collateral for B-peg USDC without reducing its supply.

But, the community suspects Forbes of spreading Fear, Uncertainty, and Doubt (FUD) against Binance.

Fudding hard aren’t you. Who is paying you?
— Bull Vibes (@BullVibes) February 27, 2023

Binance Breaking its own Rules?

Binance issues a B-token to facilitate the usage of other blockchain tokens in the BNB chain. The exchange is supposed to issue B-token only after storing 100% collateral of the original token. For example, for every 100 B-USDC, it must have 100 USDC as collateral.

However, the exchange broke its rules on Aug. 17, withdrawing $3.63 billion from its peg walletIf you’ve invested in Cryptocurrency, there’s one thing you’re always going to need — A safe, reliable Crypto wallet to store your assets in. Crypto wallets come in many shapes and sizes, with mobile, desktop and hardware wallets available for…Know more to the “Binance 8” cold wallet. It then returned $1.85 billion to the peg wallet but transferred the remaining $1.78 billion to a Binance 14 cold wallet. Later, the exchange distributed the funds to a trading firm, Cumberland, Amber Group, Alameda Research, and TRON founder Justin Sun.

Binance's activity of transferring $1.78 billion — Source: Forbes

A Binance spokesperson clarified in Jan. that the peg funds were mistakenly moved to cold wallets. Patrick Hillmann, the Chief Strategy Officer of Binance, told Forbes that “There was no commingling,” and it was normal business conduct.

B-USDC had Zero Collateral for Four Months

When Binance withdrew $1.78 billion USDC on Aug. 17, it did not decrease the supply of the B-USDC. The collateral fell to zero, and the exchange did not correct it for four months.

Binance left B-USDC with 0 collateral — Source: Forbes

The article also states that B-USDC was deficient by over $1 billion on three different occasions. Forbes believes Binance is misusing customers’ funds, similar to the bankrupt exchange FTX.

Forbes vs. Binance?

But, on various occasions community has pointed out that the publication has a soft spot for Sam Bankman-Fried while triggering FUD against Changpeng Zhao. Last year, crypto lawyer Irina Heaver tweeted that Forbes is reporting “lies and misinformation.” Also, Zhao sued Forbes for defamation and later dropped the case in 2020.

Forbes favoring SBF over Binance? — Source: Twitter

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Disclaimer

BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.

Source: https://beincrypto.com/binance-misusing-customers-funds/