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Home Crypto News

Binance Used Customer Funds For Its Own Purposes In A Move Similar To FTX Scandal

Admin by Admin
March 1, 2023
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Binance reportedly appropriated customer assets for its own purposes in a series of moves that present similarities to events leading up to FTX’s downfall.

The largest crypto exchange in the world reportedly transferred $1.8 billion in stablecoin collateral to hedge funds which subsequently left its investors exposed. These investment firms include Alameda Research, the trading arm of FTX.

Essentially, this means that more than $1 billion worth of the crypto, known as B-peg USDC, was left uncollateralized despite Binance’s claims that they were 100% backed.

“Binance does not, and has never, invested or otherwise deployed user assets without consent under the terms of specific products,” a company spokesperson told Insider in a statement. “Binance holds all of its clients’ assets in segregated accounts which are identified separately from any accounts used to hold assets belonging to Binance.”

In a largely unregulated industry like crypto, the shift in funds may not be illegal, but could pose concern for its investors.

Sam Bankman-Fried’s FTX lost more than $8 billion in customer funds after allegedly misusing the crypto exchange’s deposits for operations at sister trading firm Alameda.

“While Binance has previously acknowledged that wallet management processes for Binance-pegged token collateral have not always been flawless, at no time was the collateralization of user assets affected,” the spokesperson said. “Processes for managing our collateral wallets have been fixed on a longer-term basis.

This isn’t the first time Binance has faced scrutiny over its business practices.

Binance had secret access to a bank account belonging to its purportedly independent US partner. The company reportedly sent $400 million from the account to a trading firm that was managed by Binance CEO Changpeng Zhao.

The world’s largest crypto exchange has also reportedly faced a slew of legal and regulatory probes, which include investigations from the SEC and the Justice Department.

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