Binance To Refund Users $1 Million In USDT Following CyberConnect Incident

Binance To Refund Users $1 Million In USDT Following CyberConnect Incident

Binance, one of the leading cryptocurrency exchanges, has recently decided to refund users $1 million USDT (Tether) following an incident related to the CyberConnect (CYBER) token. 

The refund aims to compensate users affected by a price discrepancy on listed CYBER tokens due to liquidity constraints on the Korean cryptocurrency exchange Upbit.

Binance Addresses CyberConnect Woes

As described by Binance, the incident unfolded when a liquidity crunch on CYBER cross-chain bridges hindered transactions on Upbit. This led to a price disparity between Upbit and other exchanges, attracting arbitrageurs who borrowed CYBER from Binance to profit from the price difference. 

Consequently, Binance users who had staked CYBER in its Flexible Earn Program could not redeem their assets since the staked tokens had been borrowed, reaching the loan limit.

In response to the situation, Binance acknowledged users’ feedback and sincerely apologized for the inconvenience caused. The exchange affirmed its commitment to prioritizing users’ interests and maintaining high transparency within the community.

Binance provided a detailed account of the events leading to the incident. It explained that the liquidity crunch on CYBER (ERC20) tokens resulted in a surge of loan requests for CYBER, triggering Binance’s risk management protocol. 

The exchange had to halt new loan requests and increase loan interest rates significantly. However, due to the substantial volume of redemption requests, Binance faced challenges in fulfilling them immediately despite maintaining a maximum borrowing limit as a buffer for redemptions.

Stricter Reviews And Potential Delistings

Moving forward, Binance outlined measures to enhance user experience and mitigate similar risks. These measures include dynamically adjusting loan interest rates and strengthening risk management protocols. 

According to their September 7 announcement, Binance also committed to conducting stricter reviews of tokens with smaller market caps and potentially delisting tokens with lower liquidity from certain programs. To compensate affected users, Binance announced a distribution plan for the $1 million USDT refund. 

It stated that 887 impacted users who failed to redeem their CYBER Simple Earn Flexible Products positions within a specific timeframe would receive a share of USDT tokens from the refund pool and additional CYBER tokens. 

The distribution would be proportionate to the daily average positions of the eligible users. All other users who held CYBER Simple Earn Flexible Products positions during the mentioned period would receive an equal share of CYBER Locked Trial Fund vouchers sponsored by the CyberConnect Foundation.

As the cryptocurrency industry continues to evolve, incidents like these serve as reminders of the importance of robust risk management measures and continuous improvements to safeguard user interests and maintain trust in the ecosystem.

Binance Coin (BNB) is currently trading at $215, in line with the prevailing market trend of stagnation. It has experienced a slight decrease of 0.2% over the past 24 hours and a 1.3% decline over the seven days. These figures indicate a relatively stable performance for BNB amidst the market conditions.

Featured image from iStock, chart from TradingView.com

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