Binance Fumbles Transfers, Mixes User and Collateral Funds

Major mixup from Binance as the exchange is made to eat its own words regarding the allocation of customer assets in the wake of the FTX fiasco.

Binance Mixes Funds in the Same Account

Binance reportedly keeps exchange users’ funds in a cold wallet that holds reserve collateral funds. The mix of funds has admittedly been a mistake by the world’s largest cryptocurrency exchange and is a troubling acknowledgment in wake of the FTX collapse.

The mix of the funds, first detailed in a Bloomberg report from January 24 by Emily Nicolle, is held in the “Binance 8” wallet, which is publicly known to be the reserve collateral for some of the Binance-minted tokens or B-Tokens.

“Binance is aware of this mistake and is in the process of transferring these assets to dedicated collateral wallets,” a Binance spokesperson told Bloomberg.

The wallet in question has an over-collateralized amount of reserves, potentially misinforming the public of the true collateral percentage. Binane published its Proof of Collateral Report for B-tokens on January 23, and Bloomberg immediately found discrepancies.

“‘Binance 8’ is an exchange cold wallet. Collateral assets have previously been moved into this wallet in error and referenced accordingly on the B-Token Proof of Collateral page,” the spokesperson added.

Binance has consistently maintained public that it keeps user and collateral assets separate and has called this proper business practice. The news of the mixing of funds is a troubling note of hypocrisy, especially given this was a major catalyst in the collapse of FTX in the Fall of 2022.

Binance CEO Changpeng Zhao, CZ, has maintained that users should swat away at FUD, but he has not commented on the recent mistake.

The Binance spokesperson reportedly reiterated to Bloomberg that customer assets have always been back 1:1, apart from minor operational issues in the past that have since been resolved.

There was no confirmation of when Binance first learned of the fund mixup.

What is Binance:

Binance positions itself as the world’s leading blockchain ecosystem and crypto-asset infrastructure provider with a financial product suite that includes the largest digital asset exchange by volume. The Binance platform aims to increase the freedom of money for users and features a comprehensive portfolio of crypto-asset products and offerings, including trading and finance, education, data and research, social good, investment and incubation, decentralization, and infrastructure solutions.

Where to find Binance:

Website | Twitter | Discord | Telegram |

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