Binance CEO, Changpeng “CZ” Zhao stated that the “abnormal” trading of altcoins on the platform appears to be market behavior after the company revealed that the activity in question had nothing to do with compromised accounts or leaked API keys.
According to the exec’s latest tweet, a user deposited funds into a trading account and started purchasing certain coins. Shortly thereafter, others followed suit. Binance temporarily restricted withdrawals on some of the profiting accounts. The move was reversed after the exchange received a slew of complaints on social media from different countries.
Binance’s Intervention
Over the weekend, several users on Binance reported abnormal trades of certain pairs involving assets such as SUN, ARDR, OSMO, FUN, and GLM. This triggered concerns about whether hackers have stolen some users’ API keys via 3Commas and were using those accounts to execute the trades. Binance denied reports of any hack or API compromise and assured that the funds are “SAFU.”
“We are aware of the concept of too much intervention from the platform, “too centralized” attacks, etc. There is a balance to how much we should intervene. Sometimes, these happen in a free market, and we need to let it play out.”
Proof of Reserve Complications
In addition to security checks, Binance is also grappling with trust in centralized platforms. The exchange published last week its proof of reserves to quell concerns over its solvency while assuring users that funds are safe. However, its rival – Kraken’s Jesse Powell – highlighted “red flags” in the audited report.
Industry experts said that the report released by the audit firm Mazars failed to bring investors confidence in Binance’s finances. The report did not reveal information with regard to the quality of internal controls and how the crypto exchange’s systems liquidate assets to cover margin loans.
John Reed Stark, former chief of the SEC Office of Internet Enforcement, who also happens to be a vocal crypto critic, also said that the audited report “doesn’t address the effectiveness of internal financial controls” and went on to add:
“doesn’t express an opinion or assurance conclusion and doesn’t vouch for the numbers. I worked at SEC Enforcement for [18-plus years]. This is how I define ‘red flag.’”
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