[Feature] Between Massive Cash Outflow & Hiring Plans, What’s Up with Binance?

Is it simply just fear, uncertainty, and doubt (FUD) as what Changpeng Zhao (CZ) says or is the data really showing that Binance is bleeding assets? CZ pinned a tweet on his Twitter that told others in point four to "ignore FUD, fake news, attacks, etc". Then he tweeted on 10 January with regards to Forbes' report that "Binance is bleeding assets, $12 billion gone is less than 60 days", that he will do “4", which is to ignore FUD based on his pinned tweet, and ignore from here.

According to Forbes, "the outflow of cash from Binance is worse than the CEO Changpeng Zhao indicated last month, and it's become considerably more severe since then, a Forbes analysis shows." Based on data by Defillama according to Forbes, "customers withdrew a net $360 million on Friday." Outflows seem to be accelerating despite CZ's assurance that the situation had stabilised.

Nansen reported on 13 December 2022 that Binance had lost $3 billion of assets over the past week (about 4% of the firm's total). In fact, the firm lost 15% of its assets based on a Forbes investigation. CZ downplayed it via a tweet seen below though it does not change the fact that in the span of less than two months, about a quarter of Binance assets departed the exchange.

It has been stated that the withdrawals cited, took place between 4 November 2022 to 4 January 2023. According to data from Defillama and Glassnode, the $12 billion loss means that Binance has seen between 18% and 31% of the assets it held on 4 November erased. In addition, Bloomberg also reported on Tuesday that BUSD, the Binance-issued stablecoin, had lost much of its financial backing at various points. In a blog post, Binance finally admitted late Tuesday, that the BUSD had indeed lost some of its backing on multiple occasions, but the company attempted to claim there was a "timing mismatch" between itself and the regular issuer of BUSD, Paxos. You can view the extracted blog post below or via the link.

In response, a Binance spokesperson informed Bloomberg that their process for backing their stablecoin "has not always been flawless", though that only resulted in "operational delays." The company wrote that "Binance has always rebalanced or updated the assets in the pegged addresses periodically, not in real time. We now rebalance much more frequently to ensure it's always backed 1:1.”CZ had previously touted his so-called "proof-of-reserve" audit then just last month, Mazars, the firm that was conducting this extremely limited audit, dumped all its crypto clients including Binance, after it was shown that the audits do not really display the true extent of each firm’s financial situation.

One of the responses (see below) to CZ's pinned tweet explained that "there's a reason why Binance can't do an audit, and why Binance's own Fake-BUSD was over $1 billion dollars un-collateralised.”

With such a report by Forbes, it only makes sense for the "attacked" party to retaliate. Ismael Garcia, a spokesperson of Binance, suggested in an email that the firm prefers to judge the "health of an exchange" based on "daily transaction volume" though this statistic can be easily manipulated. It was also mentioned in the email that "outflows are not accelerating". Despite saying that "the Forbes analysis is poorly conceived and the numbers at which they arrive are off by billions" and "we continue to hold assets 1:1 and can fund withdrawals at any time, even at the large, albeit overstated, numbers in the article," Binance did not provide an exact number for the alleged discrepancy.

Despite the controversy, CZ announced this Wednesday at the Crypto Finance Conference held at St. Moritz, Switzerland, between 11 to 13 January, that Binance plans to increase their headcount by 15% to 30% this year. This is despite many other exchanges having massive layoffs. He said the company increased its manpower last year from 3,000 people to "almost" 8,000. According to CZ, Binance needs to get the company "well-organised" ahead of the next crypto bull run and admitted the exchange is "not super efficient.”

Is it purely just FUD as CZ ever so adamantly affirms or will the numbers eventually translate into something more tangible and visible for all to see? Between the he-says and they-say, sooner or later we will able to tell based on not sugar-coated facts.