An Internal Audit With Explosive Results

The disclosure is the latest in a series of crises for Binance, which has faced regulatory scrutiny around the world and was forced to pay $4.3 billion in penalties to the United States government in 2023. But the fee retention issue represents a different kind of problem — one that directly affects ordinary users rather than institutional concerns.

According to three people familiar with the audit, the practice began as early as 2019, when Binance first added support for USDT transfers via the TRON network. The fees, which typically amount to a small fraction of each transfer, were routed through an internal system that diverted them to Binance's operational accounts rather than returning them to users' wallets.

"Users were entitled to a refund of these funds from day one. We discovered that the system was intentionally configured to retain fees. Every wallet can now request a refund for the entire history of usage." — Richard Teng, in a statement released Friday

The cumulative amount is substantial. Analysts estimate that over the five-year period, the retained fees could total more than $2 billion across approximately 150 million affected accounts. While individual amounts may be small, the aggregate figure underscores the sheer volume of transactions that flow through the platform.

"This isn't a bug. It's a feature that was never supposed to be found."

A Shadow Over CZ's Legacy

Mr. Zhao, who is known in the industry as CZ, has built a personal brand around transparency and user empowerment. His social media presence, which includes regular posts about the virtues of decentralized finance, stands in stark contrast to the allegations now emerging about fee practices during his tenure.

When reached for comment through his representatives, Mr. Zhao declined to respond. His legal team said in a brief statement that he "is focused on other ventures and has no involvement in the current management of Binance."

What Happens Next

Mr. Teng said Binance would establish a dedicated portal where users could review their transaction histories and submit claims for fee refunds. The company has also retained an outside accounting firm to verify the total amount owed.

Regulators in multiple jurisdictions are expected to scrutinize the disclosure. The Securities and Exchange Commission, which has an existing enforcement action against Binance, declined to comment on the new revelations.

For the broader cryptocurrency industry, the scandal raises uncomfortable questions about the degree of trust users place in centralized platforms — and whether the promise of blockchain transparency can coexist with the opacity of the companies that serve as its gateway.