Image Source: FTXA new report alleges that Binance shuffled funds from different investors last year in a move “disturbingly” akin to shares of the now-defunct cryptocurrency exchange FTX.
The planet's largest cryptocurrency exchange transferred €XNUMX billion in collateral to support the stablecoins of its service clients late last year, putting the assets to other undisclosed uses, Forbes reported on the first day of the week, noting that the practice was akin to FTX maneuvers.
Specifically, holders of over US$XNUMX billion worth of B-peg USDC tokens, which are digital replicas of USDC that exist on the Binance Smart Chain owned by Binance, were found unsecured from August XNUMX through early December, if Well Binance asserts that these instruments are one hundred% supported by the token to which they were linked.
According to the report, Binance sent $XNUMX billion of those funds, which were set up as collateral to support USDC's B-peg stablecoins, to Chicago-based high-frequency trading company Cumberland/DRW. The report speculated that Binance may have used the funds to inflate its BUSD stablecoin.
“Cumberland may have assisted Binance in its sacrifices to convert collateral into its Binance USD (BUSD) stablecoin.”
Additionally, hundreds of millions more collateral transferred from Binance flowed to Amber Group, Sam Bankman-Fried's Alameda Research and Justin Sun's Tron, Forbes claimed, citing blockchain data for Binance digital wallets.
Meanwhile, Binance chief strategy officer Patrick Hillmann asserted that the movement of funds was part of the exchange's normal business conduct. He will also refute the assertions that there was a mix of funds.
“There was no mixing,” he stated, as reported, adding that “there are wallets and then there is a ledger,” the latter of which tracks each and every fund owed to users and funds or tokens that go to wallets, which are simply “containers”.
Last month, Binance agreed to hold collateral for its BNB Smart Chain and BNB Beacon Chain versions of 1 crypto assets in the same portfolio as the service's customer funds. The combination makes it difficult for clients of the service and scholars to determine whether the exchange has enough assets to meet 1:XNUMX trade requests.
Mixing at FTX was a key factor leading to its collapse
A key contributing factor to FTX's collapse was the mixing of funds between the now-dilapidated cryptocurrency exchange and its trading arm Alameda Research. Alameda was able to prudently use funds from FTX service customers through a back door that left the loan invisible to investors, employees and auditors.
John Ray III, the new CEO of the collapsed crypto exchange FTX, also asserted that FTX and Alameda Research mixed user funds, allowing the quant trading company to use the money of FTX service clients and conduct financial transactions. dangerous.
As noted, New York's top financial regulator has announced plans to produce new guidelines that will require companies to segregate their crypto assets from those of service customers early this year.