Reportsย by a Reuters report, Binanceย Cryptoย exchange, the worldโs largest digitalย currency exchange, has been accused of commingling customer funds with company revenue in breach of Unitedย States financial regulations that require customer money to be kept separate.
3 sources familiar with the matter informed Reuters that the commingling happened almost daily in accounts the exchange held at Unitedย States lender Silvergate Bank, with sums running into billions of dollars. Althoughย while Reuters couldnโt independently verify the figures or frequency, theย latestย information agency reviewed a bank record showing that on Feb. 10, 2021, Binanceย Cryptoย exchange mixed $20 Million from a corporate account with $15 Million from an account that received customer money.
Binanceโs Trustworthiness Questioned?
The commingling of funds at Binanceย Cryptoย exchange has raised concerns about a lack of internal controls to secure that customer funds were identifiable and segregated from company revenues. 3 previous Unitedย States regulatoryย authorities have warned that the commingling of these funds put client assets at danger by obscuring their whereabouts.ย
John Reed Stark, a previous chief of the Securities and Exchange Commissionโs Office of Internet Enforcement, stated Binanceย Cryptoย exchange customers shouldnโt โneed a forensic accountant to find where their money is.โ
Itโsย notableย that Reuters found no evidence that Binanceย Cryptoย exchange client monies were lost or taken. Nonetheless, the commingling of funds could still cause concern for customers who want to secure their assets are safe and secure.
SEC chair Gary Gensler has previously stated that numerous cryptocurrency exchanges offering securities to Unitedย States customers are not complying with laws requiring registered broker-dealers to safeguard client money by separating it from corporate assets.ย
Regardlessย of publicly claiming to restrict access to Americans, Binanceย Cryptoย exchange has likewise faced states that it allowed Unitedย States customers to trade on its platform from 2019 to inย theย year. In March, the Unitedย States Commodity Futures Trading Commission (CFTC) filed a complaint against the exchange, alleging that it allowed Unitedย States customers to trade derivatives without registering with the agency. Binanceย Cryptoย exchange responded in a blog that it blocks Unitedย States users.
Binanceย Cryptoย exchange Denies Wrongdoing
Reportsย by a statement made to Reuters by Binanceย Cryptoย exchange spokesperson Brad Jaffe, the accounts in question were not used to accept user deposits but toย support user purchases of the exchangeโs bespoke dollar-linked crypto- cryptoย token, BUSD. Nonetheless, previous Unitedย States regulatoryย authorities have disputed the justification, saying that it is undermined by Binanceโs previous representations to customers that the transfers were deposits.ย
From late 2020 to 2021, Binanceโs website informed customers that their dollar transfers were โdepositsโ that would be โcreditedโ to their trading accounts in BUSD. Customers were informed they could โwithdrawโ their deposits as dollars. The previous regulatoryย authorities argue that these representations created the expectation that clientsโ funds would be safeguarded like traditional cash deposits.
How Binanceย Cryptoย exchange will respond to the states of commingling of customer and company funds remains to be seen. Nonetheless, reportsย by Reuters, the previous Unitedย States regulatoryย authorities argue that the exchangeโs justification is insufficient and that the representations made to customers created the expectation that their funds would be safeguarded like traditional cash deposits.ย
Featured image from iStock, chart from TradingView.com
