Binance’s Rug Pull Scandal: $15 Million Fall

Binance is currently facing scrutiny for its handling of a rug pull incident in 2021, which resulted in victims losing $15 million worth of BNB based on today’s valuation. However, it has been two and a half years since the incident occurred, and Binance has faced criticism from the community for its lack of communication regarding the stolen funds.

The issue revolves around PopcornSwap, a protocol launched on the BNB Chain in January 2021, which executed a liquidity siphon scam through a rug pull immediately upon its launch, stealing tokens worth over $2 million at the time. BSC News, a news outlet focused on the BNB Chain and partially supported by Binance’s accelerator fund, appears to have removed its coverage of the incident from 2021, although the page can still be found on a web archive.

Typically, liquidity siphon rug pulls involve developers creating a new token and releasing it on a decentralized exchange platform to attract liquidity from users. However, the ultimate intention of malicious actors is to drain the liquidity and steal the funds.

While Binance was able to freeze users’ assets on the BNB Chain during the rug pull, temporarily mitigating the damage, the aftermath revealed a concerning lack of remediation for the affected users. A community member known as “Neonmatrixbot” expressed these concerns on Twitter, highlighting the absence of communication and action from Binance. This raises doubts about Binance’s commitment to a “customer first” approach and its centralized interference with the BNB Chain without resolving the issue for users.

Neonmatrixbot pointed out Binance’s capability to freeze tokens on the BNB Chain and the possibility of token burns and re-issuance, questioning why a resolution has not been provided. They suggested that in a normal blockchain scenario, the situation would have been resolved, but Binance’s ability to freeze tokens on its chain presents an opportunity for them to burn the frozen tokens and reissue them to the rightful owners.

Binance’s Silence: Community Met with Ignored Appeals

Despite the community’s attempts to engage Binance directly through various channels, including direct messages, support tickets, and tweets to Binance’s CEO Changpeng “CZ” Zhao, as well as seeking assistance from reputable lawyers, they have been met with silence. Frustrated by the lack of response, the affected users formed the PopcornSwap Rugpull channel on Telegram, but their efforts to communicate with the exchange have been ignored.

Community members expressed their disappointment, acknowledging the complexity of other issues Binance is currently facing but finding the lack of response discouraging. There is a general sentiment that the firm is unlikely to take action out of goodwill alone.

While Neonmatrixbot acknowledged CZ’s firm initial step of freezing the attacker’s wallet after the hack, they criticized the subsequent lack of response. They emphasized the need for answers and also highlighted the firm’s ability to halt the BNB Chain during the major hack incident, raising questions about the company’s intentions and transparency that regulators and the public should be aware of.

This criticism arises at a time when Binance is already facing regulatory challenges in the United States and Europe. In June, the Securities and Exchange Commission filed a lawsuit against CZ’s firm, alleging violations of U.S. securities laws. Additionally, Binance recently announced its withdrawal from the Netherlands due to regulatory approval failure and applied to deregister its local entity in Cyprus. Reports also suggest that the firm is under investigation in France for suspected money laundering.

Considering Binance’s increasing scrutiny from regulatory bodies and governments, this situation becomes more troubling. It prompts concerns about the company’s operational practices and its prioritization of user protection, making it crucial for regulators and the public to closely monitor the situation.