On the morning of November 26, Binance CEO Changpeng Zhao responded to the community’s questions, stating that:
- Binance holds user assets in separate wallets from those containing the exchange’s assets.
- Binance builds its wallet infrastructure to safeguard users and exchange assets.
CZ also touched on Binance wallets’ process to receive user deposits/withdrawals and calculate fees and how the exchange transfers funds between its hot wallets to minimise the user fees and ensure the necessary liquidity.
Each Binance customer would have a unique user ID for the exchange to calculate the corresponding balance, ensuring that user data is not mixed with that of the exchange platform. Therefore, Binance does not use users’ funds for other purposes. Instead, all investment income and expenditure are Binance’s money.
Transparency on Wallets at Binance | Binance Blog https://t.co/GOrjxW8RSn
— CZ 🔶 Binance (@cz_binance) November 25, 2022
However, Changpeng Zhao has not yet explained why a Binance wallet can simultaneously connect with the user’s transactions and the exchange’s funds as the Binance 8 wallet mentioned below.
One of the most recently sought-after news by the crypto community is Binance’s launch of a $1 billion BUSD market rescue fund. Various companies and projects in the crypto sector are affected by FTX, a crypto exchange that went bankrupt more than a week ago, leaving untold damage to investors.
According to the leading exchange platform, the Industry Recovery Initiative (IRI) fund would help projects with vision and long-term value, a sustainable business model, and a focus on risk management. Other large funds such as Aptos Labs, Jump Crypto, Polygon Ventures, GSR, Kronos, Animoca Brands, and Brooker Group said they would support 50 million USD in IRI to have the rights to select projects that will receive IRI’s funding.
In an interview, a representative of Binance said that 1 billion BUSD is the private property of the exchange, not users’ money. However, users are wondering about the mysterious origin of the Industry Recovery Initiative’s fund. Binance uses the same wallet to store the exchange’s assets, user assets, and security tokens on the BNB Chain.
On-chain evidence points to the mixing of
1. Binance-owned corporation funds
2. User deposits cited in “Proof-of-Reserves”
3. Binance Smart Chain pegged assets
all in the same wallet— Conor (@jconorgrogan) November 25, 2022
According to @jcornorogan, based on blockchain transaction data, Binance used the wallet address 0xf977814e90da44bfa03b6295a0616a897441acec (Binance 8) to keep over 1 billion USD of assets deposited by users to issue BUSD. Binance 8 was then mentioned in the list of addresses holding security tokens for BNB Chain.
3 months ago, billions of dollars of USDC and other coins were transferred out of a siloed BSC wallet into 0xf977814e90da44bfa03b6295a0616a897441acec
It’s unclear why Binance chose to send these funds there after years of storing funds separately. pic.twitter.com/FJ8M0P3kMs
— Conor (@jconorgrogan) November 25, 2022
Binance withdrew over 580 million USD of FTT from this wallet address that CEO Changpeng Zhao intended to sell after discovering that FTX had liquidity issues. The CEO asserts that this amount of FTT is the property of Binance, which FTX pays to Binance to buy back shares.
Binance 8 also published the Proof of Reserves or addresses that hold user assets on Binance, asserting that it preserves up to $70 billion in user assets in BTC, BUSD, USDT, ETH, USDC, and BNB.
This wallet contributed a part of the 1 billion BUSD to the Industry Recovery Initiative fund. This 1 billion BUSD was allocated from the Binance 14 wallet – a hot wallet of Binance – to the IRI, showing further evidence that the exchange shared its funds with customers.
So much transparency that CZ just pulls out a casual 1B from one of the “proof of reserves” wallets labelled Binance 14 to be the saviour of the crypto industry. pic.twitter.com/3bDMDtQijJ
— FrancisKim.eth (@FrancisKimETH) November 25, 2022
It is still suspicious why the Binance 8 wallet appears in Binance asset trading, user asset trading, and collateral asset trading for BNB Chain. It raises questions among users when the parties’ funds are mixed in one wallet, making it harder to track balance fluctuations and distinguish the users’ funds.
This goes against the exchange’s statement to separate its assets and user assets.
It also means that Binance’s FAQ is wrong :
“it is important to note that this does not include Binance’s corporate holdings, which are kept on a completely separate ledger” pic.twitter.com/oaaBWMLKx5
— Conor (@jconorgrogan) November 25, 2022
The account @jcornorogan also revealed that he was an employee of Coinbase, the largest US exchange recently “slandered” by Binance CEO Changpeng Zhao, and then deleted the post shortly after. He insists that he does not want to create a FUD but to provide information to the community.
Binance has yet to state the findings.
In addition to Binance, two other exchanges, OKX and Bybit, announced plans to set up a market rescue fund valued at $100 million each.
