Binance mishandled $1.8b in client funds in 2022 says new report
According to a new report from Forbes, Binance mishandled $1.8 billion in client funds, in 2022. This isn’t the first report that suggests that Binance mixed client funds with the company’s money.
The new report states that between August 2022, and the end of the year, Binance moved $1.8 billion in client funds that should have been backing up its stablecoin. Clients were not told about the movement, and the transfers took place at a time when the crypto markets were reeling from the FTX debacle.
More heat for Binance
Stablecoins have come under fire in 2023, as central banks get ready to roll out central bank digital currencies (CBDCs). As a stand-in for a fiat currency, stablecoins are a clear competitor for CBDC market share.
While most stablecoins do use fiat assets to collateralize the tokens, there is no industry standard, and users are left to decide if they are comfortable with the amount of transparency they have from the stablecoin’s issuer.
In this case, Binance moved funds that should have been backing the value of B-peg USDC tokens, which are a stablecoin tied to the value of the U.S. dollar. When the collateral was moved, the tokens were essentially unbacked, which should be disclosed to clients.
The majority of the funds were sent to high-frequency trading firm Cumberland, with $1.1 billion sent according to the report. The rest of the money went to now-defunct Alameda Research, as well as Tron. There has been no impact on Binance so far, but this isn’t the first time Binance has admitted to mixing company money with client funds.
Earlier this year Binance disclosed it has mixed company and client funds in the same wallet, which introduces risk into holding money with an exchange. Clients were not told about the practice at the time, which attracted criticism from many in the crypto community.
