Binance previously said the firm’s corporate holdings are recorded in separate accounts and cannot be part of the proof of reserve calculation.

Leading cryptocurrency exchange Binance has admitted that it mistakenly stores some customer funds in a wallet as its collateral for some internal tokens. Following the disclosure, Binance began the process of transferring the assets in question to dedicated collateral wallets.

Bloomberg reported on January 24 that Binance mistakenly placed some tokens created by Binance as collateral for B-Tokens in a wallet that also held client assets

On Monday, Binance released a proof of collateral for the B-token, detailing all 94 tokens issued by Binance. The firm stressed earlier that B-tokens are always fully collateralized and backed 1:1.

According to the proof of collateral, the Binance repository for about 50% of all B-tokens is currently stored in a “Binance 8” wallet. The wallet has significantly more tokens in reserve than is required for the amount of B-Tokens issued by Binance. This allegedly led to Binance matching collateral with customers’ coins rather than storing such assets separately.

Despite the case concerning only B-tokens, it seems that such a wallet management system would contradict Binance’s own wallet guidelines.

According to Binance’s Proof of Reserve (POR) page, the exchange’s corporate holdings are recorded in separate accounts, and they are not part of the reserve proof calculation Bines said:

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“When a user deposits one bitcoin, Binance’s reserves increase by at least one bitcoin to ensure that customer funds are fully backed. Importantly, this does not include Binance’s corporate holdings, which are held in an entirely separate ledger.”
According to Bloomberg, Binance has acknowledged that it is mistakenly storing B-tokens with its stores and is doing its best to fix the problem as soon as possible.

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A spokesperson for Binance says Binance is aware of the error and is in the process of transferring the assets to a dedicated collateral wallet. The representative also noted that Binance 8 is an exchange cold wallet, and said that collateral assets have been mistakenly transferred to this wallet in the past.

Binance did not immediately respond to Cointelgraph’s request for comment.

As previously reported, in the midst of the FTX crypto exchange fiasco, Binance initiated the POR process in late November to gain more public trust. By early December, the exchange gained the accounting firm a partnership with Mazars as its official POR auditor.

Immediately confirmed that Binance’s Bitcoin

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Fully bailed out, Mazars removed Binance’s POR audit from his website without explanation.

Source: CoinTelegraph