| | BINANCE HIJACKED CUSTOMERS’ COLLATERAL
Late last year, as crypto markets were struggling to regain their footing, Binance quietly moved $1.8 billion of collateral meant to back its customers’ stablecoins, putting the assets to other, undisclosed uses. The world’s largest cryptocurrency exchange did this without informing the users whose assets lost their backing. According to blockchain data examined by Forbes, from August 17 to early December–about the same time FTX was imploding–holders of more than $1 billion of crypto known as B-peg USDC tokens were left with no collateral for instruments that Binance claimed would be 100% secured.
Of the raided customer funds, which consisted of USD coin (USDC) tokens, $1.1 billion was channeled to Cumberland/DRW, a Chicago-based high frequency trading firm that may have assisted Binance in its efforts to transform the collateral into its own Binance USD (BUSD) stablecoin. Other crypto traders, including Amber Group, Sam Bankman-Fried’s Alameda Research and Justin Sun’s Tron, also received hundreds of millions of shifted collateral. Read more here. |
SILVERGATE’S FUTURE IN QUESTION
The crypto bank is losing customers by the minute as major cryptocurrency firms halt transfers via the bank’s Silvergate Exchange Network (SEN) real-time payment platform. The client exodus began Thursday morning following the company’s announcement that it was unable to complete its 2022 annual report on time and would review its ability to remain in business. Coinbase was the first to announce it would no longer accept or initiate payments with the bank. Since then, Paxos, one of Silvergate’s largest depositors, U.S. digital coin issuer Circle and Galaxy Digital, a crypto and blockchain investment business, have also suspended SEN transactions.
Silvergate said in an SEC filing on Wednesday that it needed more time to evaluate its financial reporting and to prepare disclosures of events that happened early this year. The firm’s shares lost more than half their value on Thursday, ending at $5.75 before inching higher to $5.87 on Friday afternoon. The stock ended 2022 at $17.40. |
Source: Forbes Digital Assets, powered by Nomics. Prices as of 4:00 p.m. on March 3, 2023. |
FTX REVEALS $8.7 BILLION HOLE
The failed crypto exchange has an Alameda-sized hole in its balance sheet: the sister hedge fund owes it $9.3 billion and FTX itself owes customers $8.7 billion more than the assets it has. An FTX presentation filed Thursday as part of its bankruptcy proceedings described the situation as a “massive shortfall” in the company’s holdings of digital and conventional assets. Additionally, while ousted founder Sam Bankman-Fried has repeatedly claimed that the exchange’s American affiliate is “fully solvent,” the debtors found FTX.US also has a deficit of $106 million, which includes $107 million owed to Alameda.
Nishad Singh, FTX’s former director of engineering, pleaded guilty on Tuesday to six criminal counts, including wire fraud, becoming the third company executive to do so. He agreed to cooperate with the government’s investigation of FTX’s collapse. |
COINBASE’S BLOCKCHAIN PLANS LEAVE MORE QUESTIONS THAN ANSWERS ABOUT GROWTH PROSPECTS
The giant U.S. crypto exchange is entering the blockchain business with a bang, but the path from announcement to activation is strewn with challenges as the company renews its attempt to diversify from its core trading business. Last week it announced Base, its Layer 2 platform that sits atop Ethereum and offers users faster and cheaper transactions, while remaining in sync with the underlying blockchain.
But for all its success building a crypto exchange with millions of users, many of the company’s other product development efforts have fallen flat. Additionally, Coinbase does not plan to issue a token for Base, likely to avoid speculators, not to mention questions from the SEC about whether such an asset would qualify as a security. Without one, the firm may face difficulties in attracting large and committed user base because early adopters of novel blockchain platforms and applications have come to expect compensation in exchange for their help in bootstrapping a product in the form of airdrops, tokens that are sent to their crypto wallets without charge. |
Forbes Crypto Asset & Blockchain Advisor:
Subscriber-Only Portfolio and Market Review Join Steven Ehrlich, editor of Forbes CryptoAsset & Blockchain Advisor, on Wednesday, March 8th at 2PM EST for a special virtual event where he’ll discuss the performance of the newsletter’s portfolios as well as share his perspective on the crypto market and where it’s heading. This event is typically reserved for subscribers only, but we’re opening the event up just this once for our loyal Forbes Crypto Confidential subscribers. We hope you can join us! |
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ELSEWHERE Binance CEO Ponders Exiting Voyager Deal After U.S. Scrutiny [Bloomberg]
Bankrupt Crypto Lender Celsius Reopens Withdrawals For Certain Custody Accounts [CoinDesk]
NBA Top Shot CEO’s Decadent Lifestyle, ‘Public Shaming’ Led To Toxic Culture As Dapper Flails [The Block] |
Nina Bambysheva
Reporter
Forbes Money & Markets |
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