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The world’s largest crypto exchange by market capitalization, Binance found itself in the spotlight again following a recent report by Forbes. Binance is alleged to have transferred $1.8 billion of its users’ funds without due process, per the Forbes report.

Making The Headlines

According to the Forbes report, Binance has, between August and early December 2022, “silently” moved $1.8 billion in deposits. The funds serve as collateral to support customers’ stablecoins, leaving many users with unbacked funds.

The Forbes report added that this incident happened despite claims by the company that it has wholly audited its reserves and has no need to touch clients’ deposits. Furthermore, Forbes alleges that the funds were extracted from customers’ deposits in USDC tokens, the Circle-issued stablecoins, and moved to a high-frequency trading platform based in Chicago, Cumberland/DWR.

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Forbes believes the trading firm assisted Binance in converting the collaterals to its native stablecoin, Binance USD (BUSD). Per Forbes, other key players in the crypto space, like Amber Group, Justin Son’s Tron, and Sam Bankman-Fried’s Alameda Research, have received hundreds of millions of dollars from Binance.

Furthermore, Forbes reportedly suggests that Binance manipulated its client’s deposited funds akin to the strategy employed by FTX before its subsequent bankruptcy filing in November 2022. It could be recalled that during the investigation of FTX collapse, examiners stated that FTX transferred money to Alameda Research in violation of US laws.

The Forbes article noted that because Binance is not approved as a regulated financial firm, its transactions are illegitimate. However, regulators can quickly move in to demand that regulated businesses separate their custody balances from clients’ deposits.

Binance Counters Allegations

Meanwhile, Binance has responded to the Forbes allegations of misappropriating customers’ funds and denied that it had committed any wrongdoing. A Binance spokesperson explained that the transactions were part of the company’s internal billing processes, which did not impact collateralized user assets.

The spokesperson added that Binance has previously acknowledged that its wallet management for Binance-backed assets collateral could be more flawless. But, this current transaction does not affect the collateralization of user assets.

Patrick Hillman, Binance’s CSO, later explained that the fund’s movement between wallets is normal and that the exchange does not mix user funds with the company’s own. Hillman reiterates that the exchange is open to interested parties to verify their claims’ authenticity through the public block records.

Binance has been the subject of widespread negative publicity in recent times. The founder of the FTX crypto exchange, Sam Bankman-Fried (SBF), caused an uproar within the crypto space after accusing Binance of being the reason behind his exchange’s collapse.

SBF claimed that Binance failed to collateralize its BUSD stablecoins by up to $1 billion, impacting FTX’s operations and subsequent collapse.

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George Ward

By George Ward

George Ward is a crypto journalist and market analyst at Herald Sheets, known for his engaging articles on the latest digital currency trends. With a background in finance and journalism, he presents complex topics accessibly. George holds a degree in Business and Finance from the University of Cambridge.