Former Binance Insiders Allege Mishandling of Customer Funds

Former Binance Insiders Allege Mishandling of Customer Funds


Binance, the world’s largest cryptocurrency exchange, is accused of commingling customer funds with company revenue in breach of U.S. financial rules, raising concerns about a lack of internal controls to safeguard client assets.

Reports by a Reuters report, Binance Crypto exchange, the world’s largest digital currency exchange, has been accused of commingling customer funds with company revenue in breach of United 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 United States lender Silvergate Bank, with sums running into billions of dollars. Although while Reuters couldn’t independently verify the figures or frequency, the latest information agency reviewed a bank record showing that on Feb. 10, 2021, Binance Crypto exchange mixed $20 Million from a corporate account with $15 Million from an account that received customer money.

Binance’s Trustworthiness Questioned?

The commingling of funds at Binance Crypto exchange has raised concerns about a lack of internal controls to secure that customer funds were identifiable and segregated from company revenues. 3 previous United States regulatory authorities have warned that the commingling of these funds put client assets at danger by obscuring their whereabouts. 

John Reed Stark, a previous chief of the Securities and Exchange Commission’s Office of Internet Enforcement, stated Binance Crypto exchange customers shouldn’t “need a forensic accountant to find where their money is.”

It’s notable that Reuters found no evidence that Binance Crypto 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 United States customers are not complying with laws requiring registered broker-dealers to safeguard client money by separating it from corporate assets. 

Regardless of publicly claiming to restrict access to Americans, Binance Crypto exchange has likewise faced states that it allowed United States customers to trade on its platform from 2019 to in the year. In March, the United States Commodity Futures Trading Commission (CFTC) filed a complaint against the exchange, alleging that it allowed United States customers to trade derivatives without registering with the agency. Binance Crypto exchange responded in a blog that it blocks United States users.

Binance Crypto exchange Denies Wrongdoing

Reports by a statement made to Reuters by Binance Crypto exchange spokesperson Brad Jaffe, the accounts in question were not used to accept user deposits but to support user purchases of the exchange’s bespoke dollar-linked crypto- crypto token, BUSD. Nonetheless, previous United States regulatory authorities have disputed the justification, saying that it is undermined by Binance’s previous representations to customers that the transfers were deposits. 

From late 2020 to 2021, Binance’s website informed customers that their dollar transfers were “deposits” that would be “credited” to their trading accounts in BUSD. Customers were informed they could “withdraw” their deposits as dollars. The previous regulatory authorities argue that these representations created the expectation that clients’ funds would be safeguarded like traditional cash deposits.

How Binance Crypto exchange will respond to the states of commingling of customer and company funds remains to be seen. Nonetheless, reports by Reuters, the previous United States regulatory authorities argue that the exchange’s justification is insufficient and that the representations made to customers created the expectation that their funds would be safeguarded like traditional cash deposits. 

Featured image from iStock, chart from TradingView.com

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