I guess we'll have to agree to disagree then. If customers didn't want their USDC deposits converted, they shouldn't have used Binance. Its not a public service company. Same goes for your expectations of custody, they never claimed to be one.
Conversions are even announced when you go to deposit USDC:
"Please note that your USDC Deposit will be auto-converted to BUSD at a 1:1 Ratio. Please refer to announcement details. https://www.binance.com/en/support/announcement/e62f703604a9..."
I don't see how your point holds, besides "customer expected X, but got Y" - but this is because customer is misinformed, not because Binance has an obligation to store USDC 1:1 (in this case).
Nobody said Binance was a public service company. This is another bizarre straw man.
> never claimed to be one.
Binance say they are a custodian on their own website.
> customer expected X, but got Y
Yes. Misleading people for financial gain is fraud.
> this is because customer is misinformed
No customer holding USDC in Binance knew their funds would be replaced before Binance replaced their funds.
> Conversions were announced timely.
Yes. Without consent of customers, or even any confirmation from customers that they'd read of and were aware of their coins being swapped for a different currency backed by a different organisation.
> Its the logical conclusion of people expecting Binance to hold full USDC deposit amounts
No. The logical conclusion of people expecting Binance to hold full USDC deposit amounts is a 1:1 USDC holding, not to have a second BUSD copy of every coin. This is a bizarre straw man.