Binance categorically denied a news story published by Forbes, which claimed that the world’s leading central exchange had transferred about $1.8 billion intended to secure the BUSD to various hedge funds.
The charge
According to a story published in Forbes, Binance engaged in bad practices similar to those that led to the bankruptcy of FTX.
According to Forbes, last year Binance transferred to certain hedge funds the sum of $1.8 billion in stablecoins.
As the media outlet reported, it discovered the transfer after investigating Binance’s on-chain activities, which showed the transfer of $1.78 billion of collateral to several hedge funds.
According to the Forbes story, Binance transferred the collateral to hedge funds such as Cumberland/DRW and Alameda Research and did not inform any of its clients of the movement of the funds.
Forbes added that it had been investigating data on the blockchain from August to early December, the same time period that the FTX scandal was revealed.
However, Binance has categorically denied that it has committed any wrongdoing, and the cryptocurrency community is also shown to have doubts about the accuracy of Forbes’ information.
The trail
According to the Forbes article, Binance had always used its collateral to freeze BUSD in violation of its own rules. Specifically, it withdrew $3.63 billion from the “freeze” wallet to the “Binance 8” cold wallet and then returned the $1.85 billion to the “freeze” wallet and transferred the remaining $1.78 billion to the “Binance 14” cold wallet.
These funds were then distributed to companies including Amber Group, Cumberland, Alameda Research and TRON founder Justin Sun.
Abuse of client funds, says Forbes
The article states that BUSD had been left without sufficient collateral for four months, as when Binance withdrew the $1.78 billion it did not reduce BUSD’s offering to be fully funded.
The article added that collateral for BUSD had been reduced by more than $1 billion on three other occasions in the recent past. Forbes accused Binance of abusing customer funds, just as FTX did.
Binance rejects the allegations
Binance’s Chief Strategy Officer, Patrick Hillman, has dismissed the claims made by Forbes, stating that the movement of money was a normal movement and therefore there was no problem:
“There was no mixing of customer money because quite simply there are wallets and there is a universal,” he said.
Binance categorically denied the allegations made by Forbes regarding customer funds, stating that it has never invested or used customer assets without their consent, as explicitly stated in its terms and conditions.
It added that it maintains all client funds and assets in separate accounts. These accounts, according to Binance, are identified separately from the accounts used for assets owned by Binance.
It also stated that these transfers were related to internal wallet management and at no time affected the collateral of BUSD or users’ assets.
“While Binance had previously acknowledged that its wallet management processes to secure its token pledge were not always flawless, at no time were users’ asset security affected. The processes for managing the wallet safeguards have been established on a longer-term basis and this is verifiable in the chain,” the Binance side said.
CZ’s response
The day after the Forbes publication, Binance co-founder and CEO Changpeng “CZ” Zhao said in a statement via Twitter:
“It seems they don’t understand the basics of how an exchange works. Our users are free to withdraw their assets whenever they wish.”
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