Binance Faces Allegations of Mixing User Funds and Revenue
According to insiders familiar with Binance's financial operations in 2020 and 2021, there are claims that the company mixed customer funds with its own revenue.
A recent report from Reuters on May 23 revealed that the cryptocurrency exchange regularly combined billions of dollars worth of funds through accounts at the now-defunct Silvergate Bank. Former executives and bank records were cited as sources for this information.
One particular bank record examined by the authors allegedly displayed the merging of $20 million from a corporate account with $15 million from an account that received customer funds on February 10, 2021.
Although no evidence was found indicating the loss or misuse of customer funds, former U.S. securities regulators expressed concern that obscuring the origin of these funds still poses a risk. They also suggested that such money transfers between accounts and into cryptocurrency could potentially provide Binance with a shield against tax authorities in its jurisdictions.
In response, Binance refuted the allegations of mixing customer deposits with company funds. A spokesperson for the exchange informed Reuters that the accounts in question were utilized for facilitating crypto purchases rather than accepting user deposits.
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The spokesperson, Brad Jaffe, stated, “There was no commingling at any time because these are 100% corporate funds.” He further clarified that the money transferred to these accounts was used to buy the BUSD stablecoin, comparing the process to purchasing a product from Amazon.
Binance Holdings, Key Vision, and Merit Peak were identified as the exchange’s financial network’s central components, operating through Silvergate Bank accounts. However, only a limited number of employees had comprehensive visibility into their roles.
Client deposits made on Binance.com were reportedly funneled into the Silvergate account, combined with funds from a corporate account, and then transferred to a Merit Peak account. Merit Peak, a trading firm managed by Binance CEO Changpeng Zhao, is presently under investigation by the U.S. Securities and Exchange Commission (SEC) due to its connections with Binance U.S.
Reuters discovered that Binance used the combined funds from these sources to facilitate purchases of the BUSD stablecoin but could not ascertain the value of the tokens.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
