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Binance is held responsible for thwarting an exit scam attempt on its blockchain

November 4, 2020

Binance on Wednesday announced the successful recovery of $ 344,000 in funds from the Wine Swap Exit scam attempt, a project on the Binance Smart Chain (BNB).

Wine Swap was an automated market making platform similar to Uniswap which was released on October 13th. One hour after the start had amassed USD 345,000 in funds that were quickly pulled from the platform by the creators of Wine Swap.

Then, The funds were distributed in different directions to get them out of the Binance Smart Chain. Most have switched to the Ethereum blockchain, although some have also been sent to Binance’s centralized bridge and two other exchanges. These were quickly frozen, Binance said.

Binance is held responsible for thwarting an exit scam attempt on its blockchain
Binance is held responsible for thwarting an exit scam attempt on its blockchain

Later, The Binance team was able to identify the developers of Wine Swap through on-chain analysis. The perpetrators later returned the money when they learned they had been captured.

The money is expected to be returned in its original denomination after the suspected fraudsters convert some of it into other tokens.

The story is not that different from DeFi hacks like dForce or the September hack of bZX. In all cases, the perpetrators were identified through on-chain analysis or other external factors.

Binance claims that it cannot control the funds in Binance Smart Chain, even by freezing them. Only those who make it to the stock exchange are under the company’s control.

The incident shows how it is possible for hackers and fraudsters in the Binance Smart Chain to avoid the detection using some decentralized bridging options.

Still, the smart chain ecosystem remains isolated: Binance controls validation largely through its involvement in BNB, and bridges appear to provide a useful choke point to bolster tracking down the chain.

Binance’s Smart Chain is a contractable Smart Blockchain launched by the exchange. It is fully compatible with Ethereum’s virtual machine and part of the company’s decentralized finance vision, which Binance CEO Changpeng Zhao calls “centralized decentralized finance”.