Binance Reveals it Held B-Token Reserves in Same Wallet as Customer Funds

Has admitted that it keeps its smart chain bnb and 94 crypto asset bnb beacon chain as collateral as funds in the uncertain environment of its recent audit.

According to a recent website listing, the asset balance in Binance’s “Binance 8” wallet exceeds the number of digital assets it has issued on BNB Smart Chain and BNB Beacon Chain, meaning that part of the asset balance likely belongs to customers.

Binance blends $1.3 billion in client assets with B chips.

Binance strikes B chips from multiple crypto assets such as , Ether, USDC, and , for use on other blockchain. According to Bloomberg, the exchange must keep reserves of the original tokens represented by their B-Token equivalents in distinct customer wallets.

The swap recognized the fund mix and stated that it will move the b-tokens to a portfolio of collateral assets. The binary purse 8 has approximately $1.3 billion in client assets. As long as the funds are not segregated, clients cannot be sure that BINANCE will honour 1:1 claims.

The exchange’s reputation has been under scrutiny after reports surfaced that Binance almost $350 million for Russian exchange Bitzlato. This latter association with money laundering has fueled speculation that the binary measures to combat it have been overstated.

Crypto Industry Learns Importance of Accountability the Hard Way

The discovery of Binance’s error highlights the importance of customer due diligence when choosing a centralized exchange.

The former CEO of ftx, Sam Bankman-fried, is accused of having associated ftx client funds with the alameda search to increase the solvency of the hedge fund. Ftx customers deposited funds in ftx through the account of alameda with silvergate. The silvergate trading network connects crypto investors' bank accounts to trading.

Binance has recently published a merkle proof-of-reserves report to certify its Bitcoin collateral assets needed to honor client withdrawals. He had tried in vain to call upon one of the four major accounting firms, deloitte, ey, pricewaterhousecoopers(pwc), or kpmg, to audit him.

And accounting professionals, including the former CEO of Kraken Jesse Powell, criticized the report, which was finally published by mazars from accounting firms not in the fourth category. Proof-of-Reserves without insight to the exchange’s liabilities and internal financial controls means little, experts

Shortly after the "independent verification" of Binance, Mazars closed its operations of proof of reserves, leaving more questions about customer insurance. 

Proof-of-Reserves Limitations Are Painfully Obvious, PwC Report Says

PwC recently evaluated whether Proof-of-Reserves reports contribute anything meaningful to customer confidence. 

It found that the reports reflected the assets of the exchange at a specific time, they do not provide an overview of the company's internal processes and controls and its track record in client asset management. Such information shall be available only through the type 2 soc 1 or isae 3402 reports of reputable verifiers. 

The SOC 1 reports invite accounting firms to attest to the company's management's assertions that the company has implemented certain internal controls. In contrast, the isae 3402 Type 2 reports demonstrate how internal controls have been managed over time. 

The report notes that only audited financial statements can address concerns about impending bankruptcy. It also underscores the need for clients to be familiar with industry-wide professional accounting standards. The standards also guarantee that the reports of the various fellowships are comparable.