A new report claims that Binance pooled individual investors’ funds last year in a move “early” similar to actions taken by now-defunct cryptocurrency exchange FTX.
The world’s largest crypto exchange moved a set of $1.8 billion in collateral to back its customers’ stablecoins late last year, putting the assets to other undisclosed uses, Forbes informed of Monday, noting that the exercise was similar to the maneuvers by FTX.
More specifically, holders of over $1 billion of B-PEG USDC tokens, which are digital replicas of USDC held on Binance’s proprietary Binance Smart Chain, left no collateral from August 17 to early December, despite Binance Was. claim of Such instruments are 100% backed by whatever token they were linked to.
According to the report, Binance sent $1.1 billion in funds as collateral to back the B-peg USDC stablecoin to Chicago-based high-frequency trading firm Cumberland/DRW. The report speculates that Binance may have used the funds to grow its own stablecoin business.
“Cumberland may have assisted Binance in its efforts to convert collateral into its own Binance USD (BUSD) stablecoin.”
In addition, hundreds of millions of other collateral transferred from Binance were funneled to Amber Group, Sam Bankman-Fried’s Alameda Research, and Justin Sun’s Tron, Forbes said, citing blockchain data for the Binance digital wallet.
Meanwhile, Patrick Hillman, chief strategy officer at Binance, claimed that the movement of funds is part of the exchange’s normal business conduct. He also denied claims that there was a mix-up of funds.
“Binance does not and does not trade or otherwise invest User assets without consent under the terms of specific products. Binance holds all of its customer assets in segregated accounts designated to hold assets belonging to Binance. is separately identified from any account used,” a Binance spokesperson said in a comment to CryptoNews.com.
The spokesperson claimed that the on-chain transactions identified are related to internal wallet management. He added:
“While Binance has previously acknowledged that wallet management processes for collateralizing Binance-pegged tokens have not always been flawless, at no time was the collateralization of User Assets affected. are fixed on and are verifiable on-chain.”
Last month, Binance accepted That it held its BNB Smart Chain and BNB Beacon Chain versions of 94 crypto assets as collateral in the form of customer funds in the same wallet. Mixing makes it difficult for clients and researchers to identify whether an exchange has enough assets to honor a redemption request 1:1.
Coming to FTX was a major factor in its downfall
A major factor contributing to the downfall of FTX was a lack of funding between the now-defunct cryptocurrency exchange and its trading arm, Alameda Research. Almeida was able to quietly access customer funds from FTX using a backdoor that allowed the loan to fly under the radar of investors, employees and auditors.
Collapsed crypto exchange FTX also has a new CEO, John Ray III Claimed that FTX and Alameda Research combined user funds, allowing the Quant trading firm to access FTX customers’ money and make risky financial bets.
As reported, New York’s chief financial regulator announced There are plans to issue new guidance that will mandate companies to separate their crypto assets from customers’ own as early as this year.
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