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Cryptocurrency exchange Binance is reimbursing users 1 million Tether ($1 million) due to its management of the CyberConnect (CYBER) token situation.
As explained by the exchange on Sept. 7, a price variation in listed CYBER tokens took place the previous week as a result of a liquidity shortage affecting CYBER cross-chain bridges on the Korean cryptocurrency exchange Upbit. This situation prompted arbitrage traders to borrow CYBER from Binance to capitalize on the price difference. Consequently, Binance users who had staked CYBER in its Flexible Earn Program were unable to redeem their assets since the staked tokens had been borrowed, reaching the borrowing limit. The exchange noted:
“Aside from Proof-of-Stake (PoS) based offerings, a significant portion of crypto flexible financial products earn revenue by lending out subscribed assets to other users through Margin or collateralized loans. In extreme circumstances, borrowers might not be able to repay their loans promptly, or the redemptions of subscribed assets may face delays. This was the situation on 2023-08-31.”
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Looking ahead, Binance indicated it will implement measures to raise interest rates on staked assets to discourage lending during times of significant token volatility.
As compensation, the exchange is providing 800,000 Tether (USDT) to 887 affected users who were unable to redeem their CYBER products during the incident, along with 871 CYBER in earned staking rewards. An additional 200,000 USDT in vouchers, funded by the CyberConnect Foundation, will be allocated to all users who staked CYBER through Binance Flexible Earn during the incident, irrespective of whether they opted to redeem their tokens. The company also stated:
“Binance retains the right at its sole discretion to modify or revoke this announcement at any time and for any reason without prior notice.”
Related: Binance creates smart contract to refund users affected by $3M rug pull
