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Binance caught commingling funds between US and international exchanges

305 points by senttoschool 4y ago

Mistletoe 4y ago
Why does it keep referring to Binance.us as a trick or ploy? It is the only way to use Binance for investors in the USA. Like most exchanges long ago they kicked all the USA based people off. Then exchanges were created that fulfilled USA regulations and rules. Typically coins that could be securities aren’t included. Exchanges like Binance.us, FTX.us were created. Americans without a VPN haven’t been able to use exchanges Bitmex, Binance.com, FTX.com etc. for a long time. This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick.
- jacquesm 4y ago
  Any examples of those separate websites for GDPR countries? The thing I most frequently come across is companies that more or less outright admit that without tracking their users they can not make the numbers work or that they refuse to abide by the law and so they block EU citizens outright.
  - kasey_junk 4y ago
    Nit: blocking EU citizens is not refusing to abide by the law. It’s one of several perfectly valid compliance approaches.
- Gwypaas 4y ago
  Because they are not keeping your money/stocks/tokens/whatever like they promised and should. Like all real brokers do. A bank run can not happen for a broker. It is like Vanguard sending your money to their hypothetical Chinese subsidiary because that is where they think the market is most efficient. Then when the Chinese government seizes that company's accounts, you are shit out of luck because your money is not where it is supposed to be, and the US entity is bankrupt.
  - pooper 4y ago
    The whole concept makes no sense for me. If someone deposits cash, don't offer any interest. Keep it as cash (or something backed by the US dollar). I can give Vanguard USD 5000 and feel safe thinking I can buy VTSAX anytime. This is all these exchanges need to do. Just execute lots of trades and you will make a few pennies every time. Why is it so difficult?
    - DebtDeflation 4y ago
      Because >90% of crypto exchange volume is just fake wash trades that don't generate fees for the exchange. SBF laid out in detail how crypto exchanges actually make money back in an April interview: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
      - gruez 4y ago
        >SBF laid out in detail how crypto exchanges actually make money back in an April interview: >https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm... "exchange" is mentioned exactly zero times in the article. However, I'll let that slide as presumably you meant to imply that exchanges make money through yield farming, which also doesn't make sense because yield farming doesn't involve the participation of exchanges at all. As mentioned in the article, the concept is that a smart contract accepts deposits and hands out tokens, which constitute the yield. No part of that requires exchanges.
        DebtDeflation 4y ago
        You seem to be under the impression that a crypto exchange is like a modern day stock or commodities exchange. It is not. It's much more akin to a hybrid of an 1860's era wildcat bank and a 1900's era bucket shop. Their main business is NOT executing crypto trades on behalf of customers no matter what they might say.
- chessgecko 4y ago
  The trick is that they pretended they were compliant with us regulations when they weren’t. Some users probably don’t mind this, but if there are issues they might change their mind.
- ZeroGravitas 4y ago
  Imagine you set up a seperate GDPR compliant site to keep the regulators happy, then behind the scenes transferred the customer info to the standard site and just continued to do all the stuff the GDPR tells you not to. Thats what they are alleging here, and why the supposedly seperate company is just a trick.
- Sakos 4y ago
  Did you read the post at all? > Binance.US was described as a separate entity from Binance that was merely licensing the name and certain features from the main company. > In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.” In reality, Zhao controlled Binance.US, directing its management from abroad, according to regulatory filings from 2020, company messages and interviews with former team members. An adviser, in a message to Binance executives, described the U.S. exchange as a “de facto subsidiary.” > These public issues have led many to wonder whether Binance and Binance.US are truly separate entities. We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets. Further, we demonstrate that trades allegedly happening on Binance.US’s exchange are likely being conducted directly on the main Binance exchange. > It turned out that Binance US apparently didn’t have enough USDT in its wallets to pay back customers for several hours. > However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange! We must ask, why were U.S. customer assets held in Binance addresses? > We conclude that a significant portion of Binance.US customer deposits are commingled with other deposits on Binance’s main exchange. > Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators. > In reality, Binance.US appears to be little more than a facade to obfuscate the fact that an unregulated offshore crypto business currently under investigation for money laundering and sanctions violations is doing business in the United States despite being banned from the country. The post explains quite clearly why they call it a trick. If I use Vanguard in the US, it is a completely separate entity from Vanguard in Europe. This is to ensure they meet the regulations of where they're operating. This is standard operating procedure. What Binance is doing is not.
- piva00 4y ago
  > This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick. If the EU citizens data is sneakily transferred out of jurisdiction and used without consent it's a trick and illegal by the GDPR.
eqmvii 4y ago
IIRC this blog's 2022-11-04 article "Is Alameda Research Insolvent?" was a part of what kicked off the events leading to FTX's collapse: https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent https://dirtybubblemedia.substack.com/p/is-alameda-research-...
- perihelions 4y ago
  Contemporary HN thread: https://news.ycombinator.com/item?id=33464494 https://news.ycombinator.com/item?id=33464494 (208 comments)
  - tyleo 4y ago
    Wow, incredible to see all the top comments there, “This article is jumping to conclusions. Everything seems fine.” I’m not particularly invested in the crypto space one way or another but just watching from the sidelines it seems like: * Many things that seemed fine in this space were not fine. * As a layman, Binance _seems_ to be in the same ballpark of trustworthiness as FTX. Even if you are pro-crypto it just seems like there are much less risky places to put your money than Binance at this point.
    - roflyear 4y ago
      If you're invested in crypto, you need it to work out for you.
    - derivagral 4y ago
      As someone who loosely followed and played in the space, I got scared around when Binance set up their own non-eth chain and everyone just... was OK with it. I may recall wrong, but this stuff was "justified" because people didn't want to pay the fees and delays to trade on something like Uniswap. Funny, because BNB was one of my best investments at the time, making up for other counterparty risks I didn't avoid.
    - Analemma_ 4y ago
      The top comments did indeed say everything was fine, although to be fair, almost every single reply to those comments said the OP was full of shit, and gave reasons which turned out to be entirely correct. By comment volume, the skeptics were much more represented. So it seems like the population of HN has both a bunch of boosters who will blindly upvote plausible-sounding “everything is fine” positions but also a bunch of better-informed people who will do the work in tearing those boosters down.
rich_sasha 4y ago
Not to try and create excuses for them, but if I trade on Binance.US, can I trade against someone placing orders on Binance.com? Because if yes, then the commingling of assets is expected and necessary. Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were). This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...
- sjsdaiuasgdia 4y ago
  Binance.US was supposed to be a separate entity, operating under US regulations and thus allowing people in the US to use it directly. Quoting the article: >Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators. So yes, Binance.US was created to give the impression of a separate business entity to appease US regulators and entice US investors. But it appears to all be a shell game. Deposited funds may as well have been deposited directly into Binance, which is against the public perception they created.
  - rich_sasha 4y ago
    My point is, it depends what "separate" means. It's not uncommon for regulated exchanges to have multiple shell exchanges, just as this article alludes Binance does, where orders are just routed somewhere else. If that's the case then it's unavoidable that client money moves. What is unclear to me is what independence is promised. Did they promise a fully segregated business with no links? If TFA is right then this is violated. But maybe they just promised a US entity for dealing with international Binance. If so, the only benefits you reap is there is a US business you can sue and some kind of financial supervision - quite light by the sound of it. And not, by itself, unheard of in regulated finance. Just saying "look money flowing to and fro" contradicts some but not all sane definitions of "independent".
DonHopkins 4y ago
Is there no company in the entire crypto space that isn't a wretched hive of scum and villainy? We must be cautious. https://www.youtube.com/watch?v=Xcb4_QwP6fE https://www.youtube.com/watch?v=Xcb4_QwP6fE
- esperent 4y ago
  > no company in the entire crypto space that isn't a wretched hive of scum and villainy Entire financial space. It's just that traditional financial companies are better regulated (and are better at working within the regulations to hide their crimes). But they are not in any way better humans. For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous.
  - DonHopkins 4y ago
    The armies of shill-droids that constantly post deflective whataboutism, fallacious predictions, unethical financial advice, strained rationalizations, and false equivalencies to justify the unregulated crypto space aren't better humans, or even human at all. The dark side of the force with them.
    - heartbeats 4y ago
      I don't think you should suggest people are "not even human," even if they're behaving in a deeply unethical fashion.
      - rytor718 4y ago
        I could be wrong, but I read the implication as bots/machines that trade in the financial markets. But again I could have totally misunderstood OP.
  - roflyear 4y ago
    > Entire financial space. This is true: it is about making money, after all. Greed is a good thing.
simple-thoughts 4y ago
To be frank, the evidence here is quite slim. It would be expected that market making funds would operate on both binance and binance.us and transfer funds between them either to provide liquidity or conduct arbitration. That’s not to say you should trust Binance, all centralized exchanges are suspect and CZ himself has said that eventually dex will supersede cex.
- sjsdaiuasgdia 4y ago
  We should definitely not trust CZ because he said Binance.US is an independent entity then he ran it as a subsidiary. That's a pretty solid lie and also solidly explained in the article. An independent entity operating as an exchange might do market making activities with many other exchanges. It seems Binance.US only does that with Binance. An independent entity operating as an exchange should be directly responsible for and in possession of customer funds that have been deposited with them. Binance.US couldn't fulfill withdrawals without Binance's help. That should not ever be necessary if these are separate entities.
vgatherps 4y ago
I love some good exchange fud but this article is hot garbage. None of the claims remotely follow from the evidence. * all exchanges transfer a lot back and forth on behalf of their clients. Arb desks, market makers, etc. To conclude commingling is laughable. * binance international has many different products and clientele (much more retail and people with positions) than binance us (mostly just hfts, little real world traction). No surprise that the turnover to assets is different. It doesn’t mean that trades awe executing in binance international instead of US. * binance saying some market makers have headquarters outside the US does not mean binance us trades actually happen on binance. This is so horribly, terribly wrong it makes me doubt the article is good faith. * A market maker isn’t a pair of address that move funds back and forth, unlike the article claims. The claim doesn’t even make sense. Binance US trades hundreds of millions a day, and the lifetime back but forth transfer is under 2 billion??? That doesn’t add up to “binance us does it’s trades in binance international”. The claim doesn’t even make sense. There’s no reason to send funds over to binance international, do the trade for each party there, and send funds back. If the claim is that a market making firm does so then, yeah sure, many do, so what? That’s literally how cross exchange arb works, “but in the low one and sell on the high one”. Let’s keep the content of a respectable quality. This is someone putting out some garbage so if binance does collapse, they can claim they called it ahead of time.
- kamranjon 4y ago
  I think the article was suggesting that the volume of trading exceeded the store of assets on Binance.US and as such required funds be transferred from Binance proper because it had a much better volume:exchange ratio.
  - mikeyouse 4y ago
    Right - and the Binance.US TOS tries to maintain that they are not related parties with Binance even though they share common owners: As part of an effort to offer digital asset trading technology to its customers through the Binance.US platform, BAM Trading entered into licensing agreements with Binance Holdings Limited ("Binance"), which operates the world’s largest digital asset exchange. BAM Trading and Binance share common majority ownership, but are not within the same corporate structure. The article is exactly right afaict.
shockeychap 4y ago
This looks like a potentially huge revelation. The wallet analysis looks sound, and, if correct, the implications of US customer funds being comingled in this manner could set the stage for an even worse scenario for US customers than that of FTX. Even SBF in all his criminality knew not to play AS fast and loose with US customer funds as he did with international, and John Ray has indicated that US customers will fare much better overall than others.
- 411111111111111 4y ago
  Total nonsense. FTX made no distinctions, neither by contract nor by country of origin. They'll pay out people from the US first for sure, but that's just how the bankruptcy process works and there likely won't be anything left by the time the queue moved down to foreign holders. But the reason you've provided is just plain fake news
  - ferminaut 4y ago
    > TX made no distinctions, neither by contract nor by country of origin. Apparently there was special rules for Japan. The regulations were a result of Mt Gox failing. Basically you cant comingle funds and the accounts need to be linked to a trusted third party. https://www.coindesk.com/consensus-magazine/2022/12/13/japan-was-the-safest-place-to-be-an-ftx-customer/ https://www.coindesk.com/consensus-magazine/2022/12/13/japan...
- mr90210 4y ago
  "Even SBF in all his criminality knew not to play" Even what? Really?
  - heartbeats 4y ago
    According to John J. Ray, the clean-up guy, FTX.us is solvent, or at least more so than the FTX.com silo.
    - kwantam 4y ago
wyxuan 4y ago
If I had to make a guess on what is going on, Binance US is using Binance cloud, which allows for other platforms to tap into Binance’s orderbook liquidity and infra. Mandala(an exchange) uses it, and their token mdxt doesn’t trade on Binance but still uses their infra and wallets for instance. There could be a similar arrangement where US pairs don’t appear on the intentional exchange and vice versa, even if they use the same infra
LatteLazy 4y ago
This is like the "trick" I use to avoid US speeding fines: I don't speed in the US. Then same level of fake "outrage" and (at best) ignorance applies to the rest of the article. There really SHOULD be a requirement for centralised exchanges to hold coins (in wallets they alone control etc) equal to customer deposits (with a reasonable get out for USD/USDT/USDC/BUSD etc fungibility). But there isn't. So Binance.US is free to hold them or transfer them to Binance. And given the terrible service offered by US banks, it is not surprising that they have to use Binance(main)'s rail to access payments. In fact it's totally standard.
toastercat 4y ago
I had recently remembered that I used Binance to purchase $100 worth of XRP in 2017 (around the time everyone was jumping on the crypto wagon), so I decided to try to log in to see how my investment was going. This is when I found out Binance no longer allowed US investors, and I was redirected to a US site (Binance.us). The problem was my account was on Binance.com, and it was not migrated in anyway to this new US site. I contacted support and they gave me a 7 day period to log in and withdraw my funds (which in itself is weird -- why not just migrate my account to the US site; why the sketchy, arbitrary 7 day period? whatever). I was finally able to log in! And I saw that my $100 investment had (unsurprisingly) turned into $17. I chuckled and tried to get my 17 bucks out anyway, only to find that the site no longer even offers a way to withdraw funds as an American! This whole experience that spanned maybe an hour was hilarious. I've resigned to the fact that I was scammed out of a hundred bucks. Woulda been nice to use that to buy a few games on Steam, but oh well, here we are. Hope this tale at least amuses or informs someone.
- Lionga 4y ago
  You can check out anytime you like, but you can never leave in the Hotel of Binance
- darkwizard42 4y ago
  You can withdraw your money by moving it to a Binance US wallet or honestly any other wallet (including one on Coinbase) and withdraw from there in USD. I’m not sure where you missed this in your exploration. I went through this recently as well.
  - hartator 4y ago
    Maybe it's not worth to give away all your data again to maybe get $17?
  - toastercat 4y ago
    I did consider that, and at first tried to, but then it asked me to verify my identity. Which I had done already years ago. I frankly did not feel like going through all the trouble of uploading my drivers license/supporting documents for $17. Maybe I'll try again before the 7 days is up? IDK it's the week of Christmas.
stephc_int13 4y ago
Everything is crap, except Bitcoin /s
im3w1l 4y ago
My unfounded guess is that this more about tax dodging / regulation skirting than a sign of an imminent collapse. They may have to pay a fine or something but will survive.
- lifeinthevoid 4y ago
  My guess is it's both.
  - DonHopkins 4y ago
    And just because your crypto lost 90% of its value yesterday doesn't mean it can't do that again tomorrow.
europeanguy 4y ago
I'm very skeptical of crypto, but what this is telling me is that at least one pro-crypto argument has _some_ merit: _some_ degree of additional transparency. Anyone could look at these addresses. This isn't the case with accounts in traditional banks.
lamontcg 4y ago
I'm shocked shocked to find that commingling funds is going on here! We haven't even hit the real recession in the broader economy yet.
dieselgate 4y ago
The whole thing about being “a wholly separate entity” in the context of binance and ftx us/intl. is such legal line to distract people. SBF in an interview mentioned ftx us and intl. have different “principal addresses and everything” for the two companies. I started a business a few months ago (details not important here) and hire a registered agent service to also serve as my principal address (details not important really but I rent and cannot use my residential address for these business purposes). So yes legally they’re separate entities but that really doesn’t mean much in a functional sense.
seydor 4y ago
I don't see the point of trying to take down Binance by spreading fud. If Coinbase is all that s left, then what is the point of having bitcoin at all, if it is going to be as regulated as the dollar. This would render coinbase redundant too
sempron64 4y ago
Classic case of the pot calling the kettle black re: the Binance/FTX feud

305 points by senttoschool 4y ago

Why does it keep referring to Binance.us as a trick or ploy? It is the only way to use Binance for investors in the USA. Like most exchanges long ago they kicked all the USA based people off. Then exchanges were created that fulfilled USA regulations and rules. Typically coins that could be securities aren’t included. Exchanges like Binance.us, FTX.us were created. Americans without a VPN haven’t been able to use exchanges Bitmex, Binance.com, FTX.com etc. for a long time. This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick.

jacquesm 4y ago
Any examples of those separate websites for GDPR countries? The thing I most frequently come across is companies that more or less outright admit that without tracking their users they can not make the numbers work or that they refuse to abide by the law and so they block EU citizens outright.
- kasey_junk 4y ago
  Nit: blocking EU citizens is not refusing to abide by the law. It’s one of several perfectly valid compliance approaches.
Gwypaas 4y ago
Because they are not keeping your money/stocks/tokens/whatever like they promised and should. Like all real brokers do. A bank run can not happen for a broker. It is like Vanguard sending your money to their hypothetical Chinese subsidiary because that is where they think the market is most efficient. Then when the Chinese government seizes that company's accounts, you are shit out of luck because your money is not where it is supposed to be, and the US entity is bankrupt.
- pooper 4y ago
  The whole concept makes no sense for me. If someone deposits cash, don't offer any interest. Keep it as cash (or something backed by the US dollar). I can give Vanguard USD 5000 and feel safe thinking I can buy VTSAX anytime. This is all these exchanges need to do. Just execute lots of trades and you will make a few pennies every time. Why is it so difficult?
  - DebtDeflation 4y ago
    Because >90% of crypto exchange volume is just fake wash trades that don't generate fees for the exchange. SBF laid out in detail how crypto exchanges actually make money back in an April interview: https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
    - gruez 4y ago
      >SBF laid out in detail how crypto exchanges actually make money back in an April interview: >https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm... "exchange" is mentioned exactly zero times in the article. However, I'll let that slide as presumably you meant to imply that exchanges make money through yield farming, which also doesn't make sense because yield farming doesn't involve the participation of exchanges at all. As mentioned in the article, the concept is that a smart contract accepts deposits and hands out tokens, which constitute the yield. No part of that requires exchanges.
      - DebtDeflation 4y ago
        You seem to be under the impression that a crypto exchange is like a modern day stock or commodities exchange. It is not. It's much more akin to a hybrid of an 1860's era wildcat bank and a 1900's era bucket shop. Their main business is NOT executing crypto trades on behalf of customers no matter what they might say.
chessgecko 4y ago
The trick is that they pretended they were compliant with us regulations when they weren’t. Some users probably don’t mind this, but if there are issues they might change their mind.
ZeroGravitas 4y ago
Imagine you set up a seperate GDPR compliant site to keep the regulators happy, then behind the scenes transferred the customer info to the standard site and just continued to do all the stuff the GDPR tells you not to. Thats what they are alleging here, and why the supposedly seperate company is just a trick.
Sakos 4y ago
Did you read the post at all? > Binance.US was described as a separate entity from Binance that was merely licensing the name and certain features from the main company. > In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.” In reality, Zhao controlled Binance.US, directing its management from abroad, according to regulatory filings from 2020, company messages and interviews with former team members. An adviser, in a message to Binance executives, described the U.S. exchange as a “de facto subsidiary.” > These public issues have led many to wonder whether Binance and Binance.US are truly separate entities. We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets. Further, we demonstrate that trades allegedly happening on Binance.US’s exchange are likely being conducted directly on the main Binance exchange. > It turned out that Binance US apparently didn’t have enough USDT in its wallets to pay back customers for several hours. > However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange! We must ask, why were U.S. customer assets held in Binance addresses? > We conclude that a significant portion of Binance.US customer deposits are commingled with other deposits on Binance’s main exchange. > Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators. > In reality, Binance.US appears to be little more than a facade to obfuscate the fact that an unregulated offshore crypto business currently under investigation for money laundering and sanctions violations is doing business in the United States despite being banned from the country. The post explains quite clearly why they call it a trick. If I use Vanguard in the US, it is a completely separate entity from Vanguard in Europe. This is to ensure they meet the regulations of where they're operating. This is standard operating procedure. What Binance is doing is not.
piva00 4y ago
> This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick. If the EU citizens data is sneakily transferred out of jurisdiction and used without consent it's a trick and illegal by the GDPR.

eqmvii 4y ago

IIRC this blog's 2022-11-04 article "Is Alameda Research Insolvent?" was a part of what kicked off the events leading to FTX's collapse: https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent https://dirtybubblemedia.substack.com/p/is-alameda-research-...

perihelions 4y ago
Contemporary HN thread: https://news.ycombinator.com/item?id=33464494 https://news.ycombinator.com/item?id=33464494 (208 comments)
- tyleo 4y ago
  Wow, incredible to see all the top comments there, “This article is jumping to conclusions. Everything seems fine.” I’m not particularly invested in the crypto space one way or another but just watching from the sidelines it seems like: * Many things that seemed fine in this space were not fine. * As a layman, Binance _seems_ to be in the same ballpark of trustworthiness as FTX. Even if you are pro-crypto it just seems like there are much less risky places to put your money than Binance at this point.
  - roflyear 4y ago
    If you're invested in crypto, you need it to work out for you.
  - derivagral 4y ago
    As someone who loosely followed and played in the space, I got scared around when Binance set up their own non-eth chain and everyone just... was OK with it. I may recall wrong, but this stuff was "justified" because people didn't want to pay the fees and delays to trade on something like Uniswap. Funny, because BNB was one of my best investments at the time, making up for other counterparty risks I didn't avoid.
  - Analemma_ 4y ago
    The top comments did indeed say everything was fine, although to be fair, almost every single reply to those comments said the OP was full of shit, and gave reasons which turned out to be entirely correct. By comment volume, the skeptics were much more represented. So it seems like the population of HN has both a bunch of boosters who will blindly upvote plausible-sounding “everything is fine” positions but also a bunch of better-informed people who will do the work in tearing those boosters down.

rich_sasha 4y ago

Not to try and create excuses for them, but if I trade on Binance.US, can I trade against someone placing orders on Binance.com? Because if yes, then the commingling of assets is expected and necessary. Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were). This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...

sjsdaiuasgdia 4y ago
Binance.US was supposed to be a separate entity, operating under US regulations and thus allowing people in the US to use it directly. Quoting the article: >Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators. So yes, Binance.US was created to give the impression of a separate business entity to appease US regulators and entice US investors. But it appears to all be a shell game. Deposited funds may as well have been deposited directly into Binance, which is against the public perception they created.
- rich_sasha 4y ago
  My point is, it depends what "separate" means. It's not uncommon for regulated exchanges to have multiple shell exchanges, just as this article alludes Binance does, where orders are just routed somewhere else. If that's the case then it's unavoidable that client money moves. What is unclear to me is what independence is promised. Did they promise a fully segregated business with no links? If TFA is right then this is violated. But maybe they just promised a US entity for dealing with international Binance. If so, the only benefits you reap is there is a US business you can sue and some kind of financial supervision - quite light by the sound of it. And not, by itself, unheard of in regulated finance. Just saying "look money flowing to and fro" contradicts some but not all sane definitions of "independent".

DonHopkins 4y ago

Is there no company in the entire crypto space that isn't a wretched hive of scum and villainy? We must be cautious. https://www.youtube.com/watch?v=Xcb4_QwP6fE https://www.youtube.com/watch?v=Xcb4_QwP6fE

esperent 4y ago
> no company in the entire crypto space that isn't a wretched hive of scum and villainy Entire financial space. It's just that traditional financial companies are better regulated (and are better at working within the regulations to hide their crimes). But they are not in any way better humans. For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous.
- DonHopkins 4y ago
  The armies of shill-droids that constantly post deflective whataboutism, fallacious predictions, unethical financial advice, strained rationalizations, and false equivalencies to justify the unregulated crypto space aren't better humans, or even human at all. The dark side of the force with them.
  - heartbeats 4y ago
    I don't think you should suggest people are "not even human," even if they're behaving in a deeply unethical fashion.
    - rytor718 4y ago
      I could be wrong, but I read the implication as bots/machines that trade in the financial markets. But again I could have totally misunderstood OP.
- roflyear 4y ago
  > Entire financial space. This is true: it is about making money, after all. Greed is a good thing.

simple-thoughts 4y ago

To be frank, the evidence here is quite slim. It would be expected that market making funds would operate on both binance and binance.us and transfer funds between them either to provide liquidity or conduct arbitration. That’s not to say you should trust Binance, all centralized exchanges are suspect and CZ himself has said that eventually dex will supersede cex.

sjsdaiuasgdia 4y ago
We should definitely not trust CZ because he said Binance.US is an independent entity then he ran it as a subsidiary. That's a pretty solid lie and also solidly explained in the article. An independent entity operating as an exchange might do market making activities with many other exchanges. It seems Binance.US only does that with Binance. An independent entity operating as an exchange should be directly responsible for and in possession of customer funds that have been deposited with them. Binance.US couldn't fulfill withdrawals without Binance's help. That should not ever be necessary if these are separate entities.

vgatherps 4y ago

I love some good exchange fud but this article is hot garbage. None of the claims remotely follow from the evidence. * all exchanges transfer a lot back and forth on behalf of their clients. Arb desks, market makers, etc. To conclude commingling is laughable. * binance international has many different products and clientele (much more retail and people with positions) than binance us (mostly just hfts, little real world traction). No surprise that the turnover to assets is different. It doesn’t mean that trades awe executing in binance international instead of US. * binance saying some market makers have headquarters outside the US does not mean binance us trades actually happen on binance. This is so horribly, terribly wrong it makes me doubt the article is good faith. * A market maker isn’t a pair of address that move funds back and forth, unlike the article claims. The claim doesn’t even make sense. Binance US trades hundreds of millions a day, and the lifetime back but forth transfer is under 2 billion??? That doesn’t add up to “binance us does it’s trades in binance international”. The claim doesn’t even make sense. There’s no reason to send funds over to binance international, do the trade for each party there, and send funds back. If the claim is that a market making firm does so then, yeah sure, many do, so what? That’s literally how cross exchange arb works, “but in the low one and sell on the high one”. Let’s keep the content of a respectable quality. This is someone putting out some garbage so if binance does collapse, they can claim they called it ahead of time.

kamranjon 4y ago
I think the article was suggesting that the volume of trading exceeded the store of assets on Binance.US and as such required funds be transferred from Binance proper because it had a much better volume:exchange ratio.
- mikeyouse 4y ago
  Right - and the Binance.US TOS tries to maintain that they are not related parties with Binance even though they share common owners: As part of an effort to offer digital asset trading technology to its customers through the Binance.US platform, BAM Trading entered into licensing agreements with Binance Holdings Limited ("Binance"), which operates the world’s largest digital asset exchange. BAM Trading and Binance share common majority ownership, but are not within the same corporate structure. The article is exactly right afaict.

shockeychap 4y ago

This looks like a potentially huge revelation. The wallet analysis looks sound, and, if correct, the implications of US customer funds being comingled in this manner could set the stage for an even worse scenario for US customers than that of FTX. Even SBF in all his criminality knew not to play AS fast and loose with US customer funds as he did with international, and John Ray has indicated that US customers will fare much better overall than others.

411111111111111 4y ago
Total nonsense. FTX made no distinctions, neither by contract nor by country of origin. They'll pay out people from the US first for sure, but that's just how the bankruptcy process works and there likely won't be anything left by the time the queue moved down to foreign holders. But the reason you've provided is just plain fake news
- ferminaut 4y ago
  > TX made no distinctions, neither by contract nor by country of origin. Apparently there was special rules for Japan. The regulations were a result of Mt Gox failing. Basically you cant comingle funds and the accounts need to be linked to a trusted third party. https://www.coindesk.com/consensus-magazine/2022/12/13/japan-was-the-safest-place-to-be-an-ftx-customer/ https://www.coindesk.com/consensus-magazine/2022/12/13/japan...
mr90210 4y ago
"Even SBF in all his criminality knew not to play" Even what? Really?
- heartbeats 4y ago
  According to John J. Ray, the clean-up guy, FTX.us is solvent, or at least more so than the FTX.com silo.
  - kwantam 4y ago

wyxuan 4y ago

If I had to make a guess on what is going on, Binance US is using Binance cloud, which allows for other platforms to tap into Binance’s orderbook liquidity and infra. Mandala(an exchange) uses it, and their token mdxt doesn’t trade on Binance but still uses their infra and wallets for instance. There could be a similar arrangement where US pairs don’t appear on the intentional exchange and vice versa, even if they use the same infra

LatteLazy 4y ago

This is like the "trick" I use to avoid US speeding fines: I don't speed in the US. Then same level of fake "outrage" and (at best) ignorance applies to the rest of the article. There really SHOULD be a requirement for centralised exchanges to hold coins (in wallets they alone control etc) equal to customer deposits (with a reasonable get out for USD/USDT/USDC/BUSD etc fungibility). But there isn't. So Binance.US is free to hold them or transfer them to Binance. And given the terrible service offered by US banks, it is not surprising that they have to use Binance(main)'s rail to access payments. In fact it's totally standard.

toastercat 4y ago

I had recently remembered that I used Binance to purchase $100 worth of XRP in 2017 (around the time everyone was jumping on the crypto wagon), so I decided to try to log in to see how my investment was going. This is when I found out Binance no longer allowed US investors, and I was redirected to a US site (Binance.us). The problem was my account was on Binance.com, and it was not migrated in anyway to this new US site. I contacted support and they gave me a 7 day period to log in and withdraw my funds (which in itself is weird -- why not just migrate my account to the US site; why the sketchy, arbitrary 7 day period? whatever). I was finally able to log in! And I saw that my $100 investment had (unsurprisingly) turned into $17. I chuckled and tried to get my 17 bucks out anyway, only to find that the site no longer even offers a way to withdraw funds as an American! This whole experience that spanned maybe an hour was hilarious. I've resigned to the fact that I was scammed out of a hundred bucks. Woulda been nice to use that to buy a few games on Steam, but oh well, here we are. Hope this tale at least amuses or informs someone.

Lionga 4y ago
You can check out anytime you like, but you can never leave in the Hotel of Binance
darkwizard42 4y ago
You can withdraw your money by moving it to a Binance US wallet or honestly any other wallet (including one on Coinbase) and withdraw from there in USD. I’m not sure where you missed this in your exploration. I went through this recently as well.
- hartator 4y ago
  Maybe it's not worth to give away all your data again to maybe get $17?
- toastercat 4y ago
  I did consider that, and at first tried to, but then it asked me to verify my identity. Which I had done already years ago. I frankly did not feel like going through all the trouble of uploading my drivers license/supporting documents for $17. Maybe I'll try again before the 7 days is up? IDK it's the week of Christmas.

stephc_int13 4y ago

Everything is crap, except Bitcoin /s

im3w1l 4y ago

My unfounded guess is that this more about tax dodging / regulation skirting than a sign of an imminent collapse. They may have to pay a fine or something but will survive.

lifeinthevoid 4y ago
My guess is it's both.
- DonHopkins 4y ago
  And just because your crypto lost 90% of its value yesterday doesn't mean it can't do that again tomorrow.

europeanguy 4y ago

I'm very skeptical of crypto, but what this is telling me is that at least one pro-crypto argument has _some_ merit: _some_ degree of additional transparency. Anyone could look at these addresses. This isn't the case with accounts in traditional banks.

lamontcg 4y ago

I'm shocked shocked to find that commingling funds is going on here! We haven't even hit the real recession in the broader economy yet.

dieselgate 4y ago

The whole thing about being “a wholly separate entity” in the context of binance and ftx us/intl. is such legal line to distract people. SBF in an interview mentioned ftx us and intl. have different “principal addresses and everything” for the two companies. I started a business a few months ago (details not important here) and hire a registered agent service to also serve as my principal address (details not important really but I rent and cannot use my residential address for these business purposes). So yes legally they’re separate entities but that really doesn’t mean much in a functional sense.

seydor 4y ago

I don't see the point of trying to take down Binance by spreading fud. If Coinbase is all that s left, then what is the point of having bitcoin at all, if it is going to be as regulated as the dollar. This would render coinbase redundant too

sempron64 4y ago

Classic case of the pot calling the kettle black re: the Binance/FTX feud