At the end of last year, FTX went bankrupt due to a number of major mistakes. One of those mistakes was that the company used customers’ money for its own purposes. It seems that FTX was not alone in this as Binance did the exact same thing for two years.
Unclear situation at Binance
That writes Reuters in a special ‘Reuters Investigates report’. One source of the business newspaper says he has direct knowledge of Binance’s finances and states that Binance mixed billions of dollars from customers with its own capital almost daily in 2020 and 2021. It did so in particular with accounts at Silvergate Bank, the now-bankrupt bank that did business with many crypto companies.
For example, on February 10, 2021, Binance mixed about $20 million of its own money via Silvergate with $15 million in an account of customer money. Reuters says it has no evidence that customer funds have been permanently taken or disappeared by Binance. The information is, however, echoed by what three different US policymakers have previously said.
Furthermore, Binance has a very unclear corporate structure. This is not really unknown since it has come under fire for evading sanctions regulations, but Reuters illustrates well how complicated Binance is. Silvergate was an important partner for both ‘Binance International’ and Binance.US. Nevertheless, the Binance International board had access to the accounts at Binance.US.
It also appears that Binance had no less than eight different subsidiaries and sister companies. One of these eight companies is ‘Bifinity’ one industry revealed in 2021 which would be Binance’s own payment processor. Binance CEO Changpeng Zhao (also known as ‘CZ’) would be the sole shareholder of this company.
It would have had about 680 million euros in turnover in 2021, but 420 million euros would have been sent to a single entity. One reason for the complexity, according to Reuters, was to embezzle Binance’s profits from tax authorities.
Many kric on Binance
Former SEC chief John Reed Stark stated, according to Reuters, that Binance shouldn’t need a forensic accountant to figure out where their money is. At the beginning of this year, it was announced that the amount of bitcoin (BTC) on Binance’s balance sheet was not enough to cover all customer funds, despite trying to inspire confidence with a ‘Proof-of-Reserves’.
Current SEC director Gary Gensler stated just last month that crypto exchanges often use the mixing customer money with their own money. However, he did not mention that Binance would also be guilty of this.
The CFTC claimed that Binance was still serving US customers when it was not allowed to do so. It has the Binance.US sister company for this. The CFTC also believes that Binance has engaged in market manipulation.