An analysis comparing the amount of Ethereum stolen in the Binance attack with the exchange’s October 1 reserves suggests that customer balances may have fallen below 100% backing until the losses are replaced.
CoinDesk’s analysis of Binance’s reserve report found that the Binance 14 wallet at the center of the attack was among the wallets backing customer assets. The exchange’s October 1 report listed 37 different assets at this address, including 89,475 ETH and 1.26 billion USDT.
Binance publishes a reserve report each month by comparing the assets in the wallets it checks with customer balances. In the latest report, the backing ratio for ETH stood at 100%, meaning the reported Ethereum reserves were equal to customers’ total ETH balances.
Where does the 94% estimate for Ethereum come from?
The approximately 204,500 ETH taken by the attacker represents about 5.6% of the Ethereum reserves reported on October 1. Subtracting this amount from the previous reserve figures brings the backing of customer balances down to approximately 94%.
However, this calculation is not an updated reserve measurement published after the attack; it is based on a comparison of the October 1 balances with the amount stolen. Changes in customer balances and the exchange’s assets since then, as well as the replacement of losses, could affect the current ratio.
Other assets also account for notable shares. According to the analysis’s chart, the ENA taken by the attacker amounts to about 15% of the reported ENA reserves; UNI, 10%; PEPE, 9%; and AAVE, 7%.
Binance’s commitment and the next reserve report
Binance co-CEO Yi He said that user funds are safe and that losses from the attack will be covered. We covered the exchange’s announcement that it was temporarily suspending deposits and withdrawals in our previous article.
Frozen assets are also important for making up the losses. Tether CEO Paolo Ardoino reported that more than 1.567 billion USDT had been frozen. Binance founder Changpeng Zhao said that Circle had frozen approximately $823 million worth of USDC. The exchange’s SAFU emergency fund also holds approximately $1 billion worth of Bitcoin that could be used to cover losses. The completion of the freezing process does not mean these assets have been returned to the exchange.
The next reserve snapshot is scheduled for November 1. Once these figures are published, it should be clearer to what extent customer balances are backed after the attack and whether the depleted assets have been replaced.
Not investment advice.