Last Friday, we wrote that Binance’s US subsidiary, Binance.US, transferred a huge amount to a company owned by Binance founder Changpeng Zhao (CZ). With all the controversy over the crypto exchange lately, the timing couldn’t be more unfortunate. But Binance now denies there are any issues.
Is Binance like FTX?
Reuters brought quite an allegation against Binance. The American branch of the crypto exchange is said to have transferred 400 million US dollars in 2021 to Merit Peak Ltd, a company owned by Binance CEO Changpeng Zhao. This company would provide loans to Binance, among other things, but otherwise there are few details.
The business newspaper actually accused Binance of the same kind of practices as FTX. In fact, it would be using its finances in a shady way for obscure purposes, just as former FTX CEO Sam Bankman-Fried did before FTX’s troubles started. In January, Binance admitted that it accidentally put customer assets in the wrong wallets. As a result, it seemed that Binance was practically doing the same thing as FTX.
In December, news broke that there was a problem with Binance’s Proof-of-Reserves audit, which revealed a gap in the balance sheet. Perhaps Binance does not play with credits in the way that FTX did, but something has probably gone wrong in the past.
Binance bounces criticize Reuters back
Binance denies on Twitter that it did anything wrong. The company explains that it cannot be compared to “fraudulent exchanges that are now bankrupt.” For example, the board of Binance consists of former employees of the US Department of Justice, the SEC, the FBI and the New York Federal Reserve.
Furthermore, Merit Peak was indeed a market maker on Binance, but it would have already stopped on the platform in 2021. Today it has a Market Maker program. For transparency, Binance.US publishes the information about these companies on its website, they compete for commissions.
Also, Binance.US says it never lends clients’ funds, and always holds client reserves on a one-to-one basis. This money is also controlled by the government. However, it is not clear whether this only applies to Binance.US, or also to the international branch.
There have been many attempts to draw parallels between https://t.co/AZwoBOgsqS and fraudulent exchanges that have gone bankrupt. The real facts speak for themselves: there is no comparison.
Our leadership team is staffed with former DOJ, SEC, FBI, and NYFed employees who are… https://t.co/5etl0z3ZUX
— Binance.US 🇺🇸 (@BinanceUS) February 16, 2023