Users were prevented from withdrawing their CYBER Earn assets on the exchange due to a cross-chain bridging issue.
Crypto exchange Binance is refunding users 1 million Tether ($1 million) over its handling of the CyberConnect (CYBER) token incident.
As narrated by the exchange on Sept. 7, a price discrepancy on listed CYBER tokens occurred the week prior due to a liquidity crunch constricting CYBER cross-chain bridges on Korean cryptocurrency exchange Upbit. This led to arbitrageurs borrowing CYBER from Binance to profit from the differential. In turn, Binance users who staked CYBER in its Flexible Earn Program were barred from redemptions as the staked assets had been borrowed, reaching the loan limit. The exchange stated:
“Other than Proof-of-Stake (PoS) based products, a large part of crypto flexible financial products generate income by lending out subscribed assets to other users via Margin or collateralized loans. Under extreme conditions, borrowers may not be able to repay their loans in time, or the redemptions of subscribed assets may experience some delays. This was the case on 2023-08-31.”
Moving forward, Binance said it will take action to increase interest rates on staked assets to deter lending during periods of high token volatility.
For remedies, the exchange offered 800,000 Tether (USDT) to 887 impacted users who could not redeem their CYBER products during the incident, along with 871 CYBER in accrued staking rewards. Another 200,000 USDT worth of vouchers, sponsored by the CyberConnect Foundation, will be distributed to all users who staked CYBER via Binance Flexible Earn during the incident, regardless of whether they chose to redeem their tokens. The firm also wrote:
“Binance reserves the right in its sole discretion to amend or cancel this announcement at any time and for any reasons without prior notice.”