Binanceย Cryptoย exchange, the worldโs largest digitalย currency exchange company, finds itself in the spotlight following accusations that it has been mixing customer funds with company revenue, allegedly violating Unitedย States financial regulations.
The states were raised by 3 independent sources, who disclosed to Reuters that the dubious activities allegedly tookย place in 2020 and 2021, involving billions of dollars.
1 case informed that Binanceย Cryptoย 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 Unitedย States regulatoryย authorities to claimย that Binanceย Cryptoย exchange had jeopardized customer assets by masking their exact location, pointing to deficient internal controls within the exchange.
Nevertheless, Binanceย Cryptoย exchange has disputed the states, asserting its accounts were dedicated to facilitating customer transactions.
Reports suggest that Binanceย Cryptoย exchange had been using Silvergate Bank as a central fixture in its financial operations. Itโsย worthย notingย 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 cryptoย token, Binanceย Cryptoย exchange USD (BUSD).
Silvergate Bank refrained from commenting when contacted by Reuters. In March, the bank announced its closure following customersโ withdrawal of deposits amidst a period of upheaval.
Binanceย Cryptoย exchange asย ofย now faces civil charges filed by the Commodity Futures Trading Commission (CFTC) for purportedly โstructuring entities and transactionsโ to circumvent Unitedย States regulations. Simultaneously, the Department of Justice (DOJ) is investigating the exchange over potential money laundering and sanctions violations.
Binanceย Cryptoย exchange had been reliant on a small, San Diego-based bank, Silvergate, for its Unitedย States dollar banking operations.
An investigation by Reuters emphasized Silvergateโs focus on digitalย currency lending and its readiness to bank cryptocurrency corporations. This report likewise highlighted that Binanceย Cryptoย exchange has established plentyย of offshore accounts in light of increased scrutiny from Unitedย States regulatoryย authorities over digitalย currency exchanges.
The Unitedย States Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binanceย Cryptoย exchange pastย week, alleging that the platform conducted unlawful transactions.
As per sources and documentation acquired by Reuters, Binanceย Cryptoย exchange is claimed to have employed a business registered in Latvia, Merit Peak, to channel billions of dollars of customer funds onto its platform.
Merit Peak would purportedly receive customersโ dollars or euros into Silvergate Bank accounts, mix them with other funds, and then utilize them to buy BUSD, a โstablecoin,โ on Binanceย Cryptoย 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, Binanceย Cryptoย exchange reportedly transferred the cryptoย stablecoins back into the Merit Peak account, in exchange for dollars or other customersโ funds for withdrawal.
Binanceย Cryptoย exchange has shifted a portion of its operations to Lithuania, where its subsidiary, Bifinity, converts usersโ currencies into digitalย currencies, reportsย by Reuters.
Binanceย Cryptoย exchange reportedly established Bifinity to shield profits from tax authorities. A previous executive has intimated that the company has never divulged where its Binance.com trading platform is based or the corporate taxes it pays.
In 2022, Bifinity paid โฌ42.5 Million in tax in Lithuania, ranking amongย the countryโs leading corporate taxpayers. Nonetheless, Lithuania has likewise initiated an investigation into Binanceโs unlicensed financing services.
