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The debate over CEX transparency issues resurfaced this week after Hyperliquid co-founder Jeff Yan accused Binance of underreporting user liquidations during the October 10–11 crypto market crash, which wiped out billions in leveraged positions.
In a post on X (formerly Twitter), Yan argued that on-chain platforms like Hyperliquid provide a transparent and verifiable record of trades and liquidations, unlike centralized exchanges (CEXs) that, he claimed, obscure data.“Some CEXs publicly document that they dramatically underreport user liquidations,” he wrote, pointing directly to Binance.
“Even if there are thousands of liquidation orders in the same second, only one is reported,” Yan added. “Because liquidations happen in bursts, this could easily be 100× underreporting under some conditions.”
The comments quickly went viral, with many traders and analysts weighing in on the broader implications of CEX transparency issues and the need for greater accountability in centralized trading systems.
Binance CEO Changpeng Zhao (CZ) responded indirectly to the accusations on X, emphasizing that Binance’s priority during the crash was protecting users, not engaging in public disputes.
“While others tried to ignore, hide, shift blame, or attack competitors, the key @BNBChain ecosystem players (Binance, Venus, and more) took hundreds of millions out of their own pockets to PROTECT USERS,” CZ posted. He ended with the phrase “different value systems,” which many interpreted as a subtle rebuke of Yan’s comments on CEX transparency issues.
Zhao’s defense came amid widespread frustration from traders, some of whom claimed that Binance’s systems temporarily froze during the market crash, preventing users from closing positions. Binance later issued a statement confirming that certain modules experienced short-term disruptions but denied that its core matching engines went offline.
In a Binance blog update, the exchange clarified that “the platform remained fully operational throughout the event” and announced a $283 million compensation fund for affected users which is a move intended to restore confidence in its handling of liquidation events.
The tensions between Binance and Hyperliquid stem from one of the most significant liquidation cascades in crypto history. According to CoinGlass, the two-day market crash erased more than $19 billion in leveraged positions and impacted over 1.6 million traders globally.
Bitcoin’s price plunged from $122,000 to $109,000 within hours, triggering mass liquidations across both centralized and decentralized exchanges. Hyperliquid, operating entirely on-chain, processed $50–70 billion in trading volume during the event without any downtime which is a stark contrast to the temporary service issues reported by several CEXs.
“Transparency and neutrality are key advantages of decentralized infrastructure,” Yan said in his post, calling for the industry to adopt higher reporting standards to address persistent CEX transparency issues.
Analysts say the episode underscores one of the crypto industry’s longest-running debates: the trade-off between the scalability and speed of centralized systems versus the auditability and trustlessness of decentralized alternatives.
CEX transparency issues have been a recurring theme since the early days of crypto,” noted James Harris, senior analyst at CryptoCompare, in an interview with Decrypt. The lack of standardized reporting creates a trust gap, especially during market stress.
In the aftermath of the spat, CZ addressed rumors that Binance had an ownership stake in Hyperliquid, clarifying that while Jeff Yan previously participated in Binance Labs’ first incubation program through a company called YZiLabs, the project failed, and Binance “did not recover its investment.”
According to DefiLlama data, Hyperliquid has since emerged as one of the largest decentralized perpetual exchanges, with $319 billion in July trading volume as part of a record $487 billion across DeFi perpetual markets that month.
The platform’s rapid growth and emphasis on verifiable data have made it a leading voice in the push for more transparent crypto trading infrastructure.
“Decentralized systems inherently make CEX transparency issues obsolete,” said Yan in a follow-up interview with the Hong Kong Economic Times. “Everything is verifiable, auditable, and public.”
The public back-and-forth between Yan and CZ has amplified calls for industry-wide reform around CEX transparency issues. Regulators in multiple jurisdictions including the U.S. Securities and Exchange Commission (SEC) and Hong Kong Monetary Authority (HKMA) have previously warned exchanges about misleading reporting and inconsistent disclosures.
Centralized exchanges need to earn user trust through transparency, not just liquidity, said Clara Medrano, policy fellow at Blockchain Association, in a statement to CoinDesk. Events like this prove that opacity breeds skepticism, and skepticism leads to outflows toward DeFi platforms.
As the dust settles, one thing is clear: the CEX transparency issues debate has become a flashpoint in crypto’s ongoing evolution. Whether the industry embraces decentralized verification or doubles down on internal reporting remains to be seen but the call for openness is louder than ever.
