Binance's Asset Shuffle Has Many Similarities To FTX's "Disaster"

By the end of 2022, Binance had quietly transferred $1.8 billion in customer stablecoin collateral to hedge funds, including Alameda and Cumberland/DRW.

Alameda Research hedge fund without the user's permission. While the temporary transfer of funds to Cumberland/DRW and elsewhere has not caused any harm to investors, it could cause trouble for business partners.

Cryptocurrency investigative firm Coin Argos was the first to raise concerns about Binance not following the rules of how it operates and about the ongoing lack of collateral to secure billions of dollars in tokens. issued by the exchange. "Someone received a loan worth about $1 billion in about 100 days," the company said in a January 17 report.

Fortune also reported that Binance liquidated USDC collateral and used the proceeds to pay US minting partner Paxos to generate new BUSD. Fortune speculates the goal could be to increase the market share of the USD-based stablecoin BUSD.

According to Forbes, it is hard to ignore the similarities with the transactions that contributed to the crisis and collapse at FTX. While FTX is accused of embezzling customer deposits to benefit the Alameda hedge fund also managed by founder Sam Bankman-Fried, Binance appears to have taken customer funds to use for its own purposes. its own destination. These actions may not be illegal, simply because Binance is not regulated like a regular financial company.

However, on February 28, Binance CEO Changpeng Zhao spoke up and affirmed that “Binance is different from FTX”. He said that Binance has overcome the difficult period, users can still withdraw in full in December 2022.

This is not the first time that Binance's performance has been compared to that of FTX. At the end of December 2022, Reuters cited a report that showed Binance's financial situation as a blurry picture, even "more opaque than FTX".

At that time, users rushed to withdraw $ 900 million from the exchange. At the end of January, Binance lost another 2 billion USD citing “poor management”. In mid-February, BUSD was banned and users withdrew nearly 3 billion USD in just 24 hours.