Binance accused of commingling customer and company funds

Binance accused of commingling customer and company funds

Binance, the world’s largest cryptocurrency exchange, is accused of violating US financial regulations by mixing customer funds with company revenue, prompting investigations by the Commodity Futures Trading Commission and the Department of Justice.

Binance Crypto exchange, the world’s largest digital currency exchange company, finds itself in the spotlight following accusations that it has been mixing customer funds with company revenue, allegedly violating United States financial regulations.

The states were raised by 3 independent sources, who disclosed to Reuters that the dubious activities allegedly took place in 2020 and 2021, involving billions of dollars.

1 case informed that Binance Crypto exchange combined $20 Million from a corporate account with $15 Million from a customer account on Feb. 10, 2021.

The alleged actions prompted 3 previous United States regulatory authorities to claim that Binance Crypto exchange had jeopardized customer assets by masking their exact location, pointing to deficient internal controls within the exchange.

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Nevertheless, Binance Crypto exchange has disputed the states, asserting its accounts were dedicated to facilitating customer transactions.

Reports suggest that Binance Crypto exchange had been using Silvergate Bank as a central fixture in its financial operations. It’s worth noting that, the exchange is alleged to have combined customer funds with company revenues in a third Silvergate account, which were then converted into the dollar-linked crypto token, Binance Crypto exchange USD (BUSD).

Silvergate Bank refrained from commenting when contacted by Reuters. In March, the bank announced its closure following customers’ withdrawal of deposits amidst a period of upheaval.

Binance Crypto exchange as of now faces civil charges filed by the Commodity Futures Trading Commission (CFTC) for purportedly “structuring entities and transactions” to circumvent United States regulations. Simultaneously, the Department of Justice (DOJ) is investigating the exchange over potential money laundering and sanctions violations.

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Binance Crypto exchange had been reliant on a small, San Diego-based bank, Silvergate, for its United States dollar banking operations.

An investigation by Reuters emphasized Silvergate’s focus on digital currency lending and its readiness to bank cryptocurrency corporations. This report likewise highlighted that Binance Crypto exchange has established plenty of offshore accounts in light of increased scrutiny from United States regulatory authorities over digital currency exchanges.

The United States Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance Crypto exchange past week, alleging that the platform conducted unlawful transactions.

As per sources and documentation acquired by Reuters, Binance Crypto exchange is claimed to have employed a business registered in Latvia, Merit Peak, to channel billions of dollars of customer funds onto its platform.

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Merit Peak would purportedly receive customers’ dollars or euros into Silvergate Bank accounts, mix them with other funds, and then utilize them to buy BUSD, a “stablecoin,” on Binance Crypto exchange. The exchange is stated to have pocketed transaction charges and financing profits, taking advantage of the less regulated European financial ecosystem.

Following these operations, Binance Crypto exchange reportedly transferred the crypto stablecoins back into the Merit Peak account, in exchange for dollars or other customers’ funds for withdrawal.

Binance Crypto exchange has shifted a portion of its operations to Lithuania, where its subsidiary, Bifinity, converts users’ currencies into digital currencies, reports by Reuters.

Binance Crypto exchange reportedly established Bifinity to shield profits from tax authorities. A previous executive has intimated that the company has never divulged where its trading platform is based or the corporate taxes it pays.

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In 2022, Bifinity paid €42.5 Million in tax in Lithuania, ranking among the country’s leading corporate taxpayers. Nonetheless, Lithuania has likewise initiated an investigation into Binance’s unlicensed financing services.


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