• Binance, a major crypto exchange, has admitted to mistakenly mixing customer funds with collateral for Binance-issued tokens.
• This was found by Jonathan Reiter, who noticed excessive over-collateralization of some B-Tokens and Binance’s use of the Binance 8 wallet.
• A Binance spokesperson has said that assets held with the exchange have been and continue to be backed 1:1 and that Binance is in the process of transferring these assets to dedicated collateral wallets.
Binance, the leading crypto exchange, has recently admitted to mistakenly mixing customer funds with collateral for Binance-issued tokens. This problem was first brought to light by Jonathan Reiter, the co-founder of DataFinnovation and ChainArgos, who noticed excessive over-collateralization of some B-Tokens and Binance’s use of the Binance 8 wallet. This was in direct violation of Binance’s own guidelines, which should have seen customer funds and exchange collateral stored in separate dedicated wallets.
As a result of this mistake, Binance released a proof-of-collateral report for B-Tokens – 94 tokens that are issued by Binance – which showed that reserves for nearly 50% of all these coins were stored in the Binance 8 wallet. Bloomberg calculated (based on Binance data from January 20) that Binance issued more than $539 million of the 41 B-Tokens that have Binance 8 as their collateral wallet, while the wallet itself only held $417 million in tokens.
A spokesperson for Binance has since come forward to address the issue, saying that Binance 8 is an exchange cold wallet and that collateral assets had previously been moved into this wallet in error. They also commented that assets held with the exchange “have been and continue to be backed 1:1” and that Binance is “in the process of transferring these assets to dedicated collateral wallets.”
Binance has taken the mistake very seriously, and is now working to ensure that customers’ funds are held in separate wallets. This is an important step in protecting customers’ funds and maintaining the trust that customers have placed in Binance. It also shows that the exchange is taking all necessary steps to ensure that customers’ funds are safe and secure at all times.