Binance allegedly engaged in fraudulent activity with a Pakistani crypto expert Waqar Zaka, locking his millions forever.
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After receiving several complaints about a scam that entailed tricking investors into sending money from Binance wallets to unidentified third-party wallets, the Pakistani federal agency launched a criminal inquiry.
To track down connections around a multi-million-dollar cryptocurrency scam in the region, Pakistan’s Federal Investigation Agency (FIA) has sent a formal notice to cryptocurrency exchange Binance.
After receiving many complaints about an ongoing Binance fraud that tricked investors into sending money from Binance wallets to unidentified third-party wallets, the Pakistani government launched a criminal investigation. Local media reports that the FIA’s Cyber Crime Wing has sent Binance Pakistan’s general manager Hamza Khan an order to appear in person to determine the exchange’s connection to “fraudulent online investing mobile applications.” Pakistani Crypto Expert, Waqar Zaka, who is a crypto guru has been following the events and frequently warning his community of thousands not to keep many funds in the Binance exchange. Not after the Binance fraud, he would ask them not to trust any centralized exchange and the crypto community learned it after the FTX collapse. Although, the Binance fraud happens long before the FTX.
KARACHI: Federal Investigation Agency (FIA) has detected an online fraud of Rs100 billion using a cryptocurrency and issued notice to the local representative of Binance, @cz_binance @binance @BinanceHelpDesk @BinanceUS pic.twitter.com/3oukwzmDqh— ★ʙᴇɴɴʏᴅᴀᴡᴀʀ★ (@FighterDawar) January 7, 2022
According to a spokesperson for Binance, the company generally cooperates with regulatory inquiries in these situations.
We do not comment on specific matters with regulatory and law enforcement authorities. However, as a matter of policy, our general approach is to cooperate with investigations wherever possible. Specifically, Binance tries to work closely with the law enforcement and regulatory— Binance Pakistan 🇵🇰 (@BinancePk) January 7, 2022
To further clarify, a pertinent questionnaire has also been issued to Binance US and Binance Headquarters in the Cayman Islands.
How Binance Fraud was carried out?
Under the guise of unrealistic profits, individuals were asked to register on Binance and transfer money to third-party wallets to carry out investment fraud in Pakistan. As stated in the FIA notice:
“These initiatives eventually disappear after amassing a significant capital base worth billions of rupees, benefiting current clients at the expense of new ones.”
Simultaneously, a Telegram group was created in which the admins of the Telegram group and the application’s mysterious owner provided “so-called expert betting signals on the rise and fall of Bitcoin. When significant wealth was amassed, the apps failed, causing thousands of users to lose their money.
The purported investment ranged from $100 to $80,000, with an average of $2,000 per investor, bringing the total value of the alleged swindle to about $100 million. MCX, HFC, HTFOX, FXCOPY, OKIMINI, BB001, AVG86C, BX66, UG, TASKTOK, and 91fp were the apps that were named.
All bank accounts connected to the apps have been blocked; Binance has been approached for information regarding the 26 wallets; Telegram has been notified; influencers who pushed the apps have been sent legal letters, and all bank accounts connected to the apps have been blocked.
What exactly happened?
Over 30% of BTC perpetual crashed that day. Everyone who knows about Binance had a mystery partial outage during which time they were unable to trade or close positions.
Prices kept fluctuating throughout the downtime, indicating that some trades continued to take place.
Now all the traders who lost money because of @cz_binance @cz_binance are getting together , here is another one who lost money on the same day as I lost because of @cz_binance fraud https://t.co/vd2849kHGU— Waqar Zaka (@ZakaWaqar) December 3, 2022
The experts believe that the following may be the cause of this Binance fraud:
- The Binance Futures platform lacked liquidity and might be bankrupt.
- A death spiral is caused by a rebalancing loop that is activated on leveraged tokens.
- Binance fakes its trading data to produce higher volume and smoother price action.
- Insider trading?
An insurance fund is available on the Binance Futures platform to offer liquidity in the absence of suitable counterparties. Its resources are employed to make liquidations easier.
The fund intervenes in cascade liquidations to take over positions and eventually resell them to the market.
Insurance fund trades are over 475M USDT. This is quite severe considering that their fund had only 292M USDT on hand that day.
Binance Leveraged Tokens presented another issue for the exchange. The tokens are intended to keep the goal leverage or peg at a specific level. The unpredictable price movement was probably caused by manual Binance intervention.
Interrelated, leveraged assets create a death spiral and an endless minting loop that is headed to 0.
As if nothing had happened, Binance backfilled its trading data on TradingView.
The bottom (backfilled) has smoother price action and more volume as compared to the top (original), giving the impression of a superior trading experience.
Sigma Chain AG and Merit Peak Ltd., two firms owned by Binance executives, are comparable to what Alameda was to FTX.
Binance made every effort to sweep May 19, 2021. Aaron Gong posted his apology for the Binance Futures event along with a form for reimbursement – it was quickly removed.
A CEX should not be trusted until they are completely verifiable. Binance finances appear to be very entwined.
There’s no separation between:
- their resources
- client monies/reserves
- funds for futures insurance
Simply put, the current verification of reserves is inadequate. “Don’t trust, verify” is not a guiding philosophy at Binance.
Release audited financial sheets as well because Binance is the main entry point for fiat.
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Disclaimer: This blog is for educational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.