Binance denies improper use of $1.8 million in user funds

Binance, the world’s largest cryptocurrency exchange, denied a report published by Forbes titled “Binance’s Asset Shuffling Eerily Similar To Maneuvers By FTX,” which claims that the crypto giant transferred $1.8 billion linked to its users’ funds.

according to ForbesBetween August 17 and early December 2022, Binance “quietly” moved $1.8 billion in deposits “as collateral intended to support its clients’ stablecoins,” leaving many of its users with unprotected funds.

That was despite the company saying it fully audited its bookings and never touched customer deposits.

What Forbes says

According to Forbes, $1.1 billion of funds withdrawn from customers in USDC tokens, the stablecoin issued by Circle, was sent to Chicago-based high-frequency trading firm Cumberland/DWR. Forbes reports that the company “may have assisted Binance in its efforts to convert collateral into its Binance USD (BUSD) stablecoin.”

Forbes also claims that other major players in the crypto ecosystem, such as Amber Group, Sam Bankman-Fried’s Alameda Research and Justin Sun’s Tron, received hundreds of millions of dollars from Binance.

“According to blockchain data analyzed by Forbes, from August 17th to early December, the same time FTX was imploding, owners of more than $1 billion worth of crypto, known as B-peg USDC tokens, were left without collateral for the instruments Binance said. 100% protected with whatever token they must be.”

Forbes suggests that the way Binance manipulated its customers’ funds mimicked the maneuvers FTX made before it filed for bankruptcy. US investigators say FTX sent money to Alameda Research despite being banned.

The article states that because Binance is not regulated as a standard financial company, it automatically means that its transactions are illegal. However, regulators find it easier to require regulated businesses to separate from the custodians of their clients’ assets.

Binance responds to Forbes allegations.

Binance responded to Forbes’ allegations of mishandling user funds, denying any wrongdoing. Company spokesperson guaranteed the transactions in question were part of their internal billing processes and did not affect the guarantee of users’ assets.

“While Binance has previously acknowledged that the processes for managing pegged token collateral portfolios on Binance have not always been flawed, in no way has the collateral of users’ assets been compromised. Our collateral portfolio management processes have been established over a longer period of time and this can be verified on-chain.”

Later, Binance CSO Patrick Hillman, explain that capital movements between portfolios are normal and that the exchange does not commingle its assets with client funds. It has invited interested parties to verify the veracity of their claims in public blockchain records.

Binance’s efforts to combat the effects of bad publicity are not superficial. The exchange has been involved in several situations that have tarnished its image. From the CEO of FTX Alleging Binance CEO to orchestrate the downfall of his exchange, in some previous Binance did not get its BUSD collateral Stablecoin up to $1 million.

And beyond that, the stablecoin itself is currently under the microscope of regulators. Paxos stopped working 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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