Top cryptocurrency exchange Binance is said to have processed ~ $346M in bitcoin (BTC-USD) for trading platform Bitzlato, whose founder Anatoly Legkodymov was accused of fraud and ransomware.
Bitzlato is said to have arranged over $700M of illegal capital, including ~$15M in redemption proceeds. The US Justice Department said Bitzlato exposed the vulnerability of its clients, Reuters report.
Binance was named as one of the top three receiving and sending peer-to-peer exchanges against Bitzlato. A spokesperson told Reuters that Binance had provided “significant assistance” to international law enforcement agencies to support their investigation into Bitzlato.
Differences in B-Token
In another case, Binance admitted that it improperly stored the collateral of some of the digital assets it offered in the same wallet as the funds of its platform’s customers.
Binance releases its own versions of third-party tokens for use on other blockchains since cryptos are only compatible with the blockchain they are built on.
It issued 94 Binance Bridge tokens (B-Tokens), reported Bloomberg, and the reserves of about half of these are kept in a cold wallet called Binance 8.
Binance 8 is said to have more assets than the required number of B-Tokens issued. This shows that the collateral is mixed with the user’s assets as the indicators must be supported 1:1.
“Binance is aware of this error and plans to transfer these assets to dedicated wallets,” a spokesperson for the company told Bloomberg, adding that the tokens held by Binance “continue to be supported 1:1”.
The issue comes at a time when the security of users’ money on the exchange is being questioned. If the exchange is experiencing a financial crisis or an increase in redemption requests, users will not be able to access their money if it is stored in a wallet similar to collateral.
Binance did not immediately respond to a request for comment.
In the past, crypto companies faced hurdles to get SEC approval to go public.