Cryptocurrency trading platform Binance is said to have moved $1.8 billion in collateral to other parties in 2022, but was denied by the exchange.
According to sources of Forbesthe Binance exchange in 2022 had a time when it failed to fully back the $1.8 billion in derivative tokens issued by the platform.
Specifically, the source claimed that Binance circulated $1.8 billion in collateral for the stablecoin USDC version issued on BNB Chain to investment funds such as Alameda Research, Amber Group and Cumberland without notifying customers. The time to record that situation is from mid-August 2022 to early December 2022, which is right after the liquidity crisis 3AC-Celsius – Voyager came after the rapid collapse of FTX.
In its latest backroom maneuver, Binance transferred $1.8 billion in stablecoin collateral to hedge funds, including Alameda and Cumberland/DRW, leaving its other investors exposed. https://t.co/q1h7AlFSWZ pic.twitter.com/PjFHZnY2px
— Forbes (@Forbes) February 27, 2023
The article also alleges that Binance transferred 1.1 billion USDC to Cumberland, an investment fund based in Chicago (USA), in order to convert it into Binance’s own stablecoin BUSD to increase market share compared to USDC.
During the time of USDC outflow, Binance still did not burn USDC issued on BNB Chain, meaning they were not fully securitized.
Binance Chief Strategy Officer Patrick Hillman confirmed to Forbes that it is normal and not problematic for the exchange to regularly transfer funds between wallets, committed to not mixing customer funds and always maintaining full accounting records.
A spokesperson for Binance also released a statement regarding the article Forbes as follows:
“Transactions that arec indicated as the exchange’s internal wallet management. Although Binance has previously acknowledged that there was a mistake in the collateral management of the tokens reissued by Binance, it has never affected user funds. Our collateral management is routine and can be verified from blockchain data.”
In January 2023, Binance admitted to keeping customer deposits with collateral for derivative tokens in the same wallet, and pledged to make adjustments to fix it. The exchange was also found in 2021 to have failed to maintain enough funds to guarantee the value of stablecoin BUSD.
Binance in recent years has continuously become the target of attacks in the legal aspect, the latest being the SEC and the New York government “touching” the stablecoin BUSD.