Binance Under Scrutiny: Crypto Crash Sparked by Alleged Margin System Exploit A recent crypto market sell-off, which saw an estimated $19-20 billion wiped out across various cryptocurrencies within 24 hours on October 10-11, has ignited a fervent debate. At the heart of the controversy is a claim from Uphold's head of research, Dr. Martin Hiesboeck, who alleges the massive liquidation event was a "targeted attack" exploiting a significant flaw in Binance's Unified Account margin system.
Allegations of a Targeted Exploit
Dr. Hiesboeck specifically points to how Binance handled collateral assets such as USDe, wBETH, and BnSOL within its margin system. He contends that the liquidation prices for these assets were derived from Binance's own volatile spot market, rather than being anchored to robust, reliable external data. This crucial design flaw, he argues, created a vulnerability that allowed for a cascading series of liquidations once these specific instruments depegged on Binance's order books. Furthermore, Hiesboeck suggested the timing of the exploit was strategically chosen to occur during a narrow window between Binance's announcement of a system fix and its actual implementation.
Binance's Response and Market Aftermath
In response, Binance publicly acknowledged "extraordinary price dislocations" affecting these precise instruments during the critical October 10-11 period. The exchange committed to compensating all affected Futures, Margin, and Loan users who held USDe, BnSOL, and wBETH as collateral and were impacted by the depeg. Compensation is calculated as the difference between the market price at a specified UTC time and their respective liquidation price. Binance also stated it would implement "risk control enhancements" following the incident to prevent future occurrences. The depegging was severe, with USDe briefly plummeting to $0.65, triggering widespread forced unwinds and impacting margin balances. Hiesboeck later elaborated on the chain of events, attributing the "Trigger" to an external macroeconomic shock – specifically, new tariff threats from the US President against China, which led to a cross-asset risk-off sentiment. This was "Amplified" by excessive leverage used by many participants, leading to a "Domino Effect" where panic selling hit supposedly stable assets like USDe and wBETH, causing them to depeg. While acknowledging the external trigger, Hiesboeck ultimately characterized Binance's role as a "bad design" rather than pure malice, stating that their system "dumped [collateral] immediately at any price." As the crypto market recovers, with the total market cap climbing back to $3.87 trillion, the debate continues over whether the incident was a targeted exploit or a design oversight exacerbated by market conditions.
