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Binance commingled customer funds and company revenue, former insiders say
- jqpabc123 3y agoColor me surprised. There is no accountability or recourse of any kind in cryptoland. You and your money are totally at the mercy and trust of the exchanges.
- radiox_eth 3y agoThis is true only if you keep your funds in an exchange instead of your own wallet.
- jqpabc123 3y agoNo, this is still true. Even with your own wallet, the exchanges set the value of what is in it. Even if you trade P2P, the exchanges are still an overarching influence and can easily manipulate prices as they see fit using their unlimited supply of "stable coins". Face facts, cryptoland is owned by the exchanges. They operate with all the power of the Federal Reserve minus any oversight or accountability. There is nothing accountable or transparent or "free market" about it. When trading crypto, you are totally at their whim and mercy.
- saurik 3y agoI'd argue that, in some sense, their accountability comes from two places: that if they try to enforce a price--as you are claiming that they are actually setting the price--that is non-sensical, then people will fleece them by taking advantage of the arbitrage opportunity, and--and I'd argue that this is particularly important as this is part of the narrative of this whole concept--that there are multiple of them and the only thing preventing there from being a lot of onramps are government regulations trying to prevent such: decentralized systems and markets get their trust from having options and backup plans in the case that a bunch of people are (and they always are) corrupt.
- jqpabc123 3y agoHe who has the gold makes the rules --- and can create his own market/arbitrage opportunities. The exchanges have all the crypto gold they need --- if/when they need more, they can just make it by way of "stable coins".
- reducesuffering 3y agoYa, then in your own wallet, you're just waiting for the inevitable hack to lose it all, like one of the bitcoin core devs. https://siliconangle.com/2023/01/02/bitcoin-core-developer-loses-3-6m-bitcoin-claimed-hack/ https://siliconangle.com/2023/01/02/bitcoin-core-developer-l...
- fakedang 3y agoIsn't this what they also accused FTX of doing?
- djbusby 3y agoFTX also spent the customer money on themselves.
- fauxpause_ 3y agoGive them time
- koalala 3y agothere was a run recently, everything was paid out and life continued normally. the binance CEO actually encourages this as it's a stress test [1]. [1] https://cointelegraph.com/news/crypto-community-members-discuss-bank-run-on-binance https://cointelegraph.com/news/crypto-community-members-disc...
- fauxpause_ 3y agoThat is irrelevant?
- aww_dang 3y agoMore importantly, FTX couldn't make customers whole during an exit stampede. As long as there is no rush to the exits or until there is, the entire issue is relatively irrelevant.
- fdsafdsafdsklj 3y agoThe exit stampede had nothing to do with it. FTX had less assets than liabilities. Customer's wouldn't have been made whole if they gave FTX a hunderd years.
- boeingUH60 3y agoNothing to see here. This is a reputed and transparent financial institution. The government is just jealous of having competition.../s Binance has no known headquarters or transparent books. If you keep money there and you lose it, it's your fault. The same applies to Tether. You're only betting on trust instead of regulations, which never bodes well in the long run. As a side note, Binance was founded in 2017 and grew to process hundreds of billions of dollars in transactions in a few years. In a hypothetical world as the CEO of such company, how would I even handle such growth without my mind exploding?
- roenxi 3y agoI work on the theory that any crypto firm is a gang of thieves run by charlatans. However, the regulated banks also appear to be gangs of thieves run by charlatans. Except everyone is forced to signal, financially, that they have confidence in firms when they turn out to be insolvent. And the people involved with crypto can't be forced to bail out Binance unless they trust them with their funds. I have a lot more faith in the value of my Monero than the USD - which I say for rhetorical effect since I don't trust the USD enough to own any. Silicon Valley Bank has detoothed a lot of criticism of the crypto industry, and it hasn't even been the biggest collapse this year. Then there is the inflation problem that that fiat currencies have which is on display right now.
- smcl 3y ago> I have a lot more faith in the value of my Monero than the USD I've heard people say this about various cryptocurrencies over the last few years and I just cannot take the statement seriously. It just always comes across as a deliberately exaggeration of belief in a cryptocurrency in an attempt to persuade others to get in on it. Not only that, I cannot imagine a world where USD collapses and somehow things like Monero or Ethereum stick around and continue to work just fine.
- rschneid 3y agoWhat about this statement is so hard to take seriously? There are a variety of concerns one could have about either fiat/fiscal policy or cryptocurrency development/deployment/stewardship. One is a highly centralized system, the other is relatively decentralized. They have different threat models, strengths, and weaknesses. I would hazard a guess that your demographic profile is similar to the members of the current cabal that try to control USD's supply and value but to those who don't have similar priorities, crypto offers a different set of values than the 'traditional' finance system. The two aren't mutually exclusive, and the person you're replying to didn't say either would be 'just fine' without the other... Not sure why you're proud of your inability to defeat a straw man!
- JumpCrisscross 3y agoThe big risk for Binance is AML. If they’re violating U.S. sanctions, they’re liable to having their funds frozen and ability to access dollars in blocked.
- fastball 3y agoTheir KYC is actually pretty strict. They have a separate entity for US customers, which I assume doesn't violate US sanctions.
- onlyrealcuzzo 3y agoToo little, too late. Part of KYC is also not sending dollars to sanctioned international corporations & individuals as well.
- diab0lic 3y agoIt is anything but strict. In fact they’ll help you circumvent it. https://amp.cnn.com/cnn/2023/03/27/business/binance-cftc-lawsuit/index.html https://amp.cnn.com/cnn/2023/03/27/business/binance-cftc-law...
- teknopurge 3y agoThe content in article doesn't even satisfy the headline/title. The quotes in the article specifically state what the accounts are for but the author hand-waves on what "could" be if many hypotheticals are reality. Do better Reuters.
- JumpCrisscross 3y ago> content in article doesn't even satisfy the headline/title How does “the news agency reviewed a bank record showing that on Feb. 10, 2021, Binance mixed $20 million from a corporate account with $15 million from an account that received customer money” not satisfy the headline?
- teknopurge 3y ago> According to the sources and the February 2021 bank record seen by Reuters, Binance mixed customer money and company revenues in a third Silvergate account, belonging to a Zhao-controlled Cayman firm. Binance converted money from this third account into the dollar-linked token BUSD, according to the person with knowledge of Binance’s group finances and company messages > These accounts were not used to accept user deposits; they were used to facilitate user purchases” of crypto, said spokesperson Brad Jaffe. “There was no commingling at any time because these are 100% corporate funds.” When users sent money to the account, he said, they were not depositing funds but buying the exchange’s bespoke dollar-linked crypto-token, BUSD. This process was “exactly the same thing as buying a product from Amazon,” The article has a lot of details and infographics - but ends with no conclusion, just guesswork. I appreciate the work and time that went into an article like this - it would be nice if it was more factual and less "blind-sourced" extrapolated hypothesis.
- smoovb 3y ago"Binance, commingled customer funds with company revenue in 2020 and 2021, in breach of U.S. financial rules" Guess it is fortunate for them they are not a US company governed by U.S. financial rules.
- mikeyouse 3y agoAlas, if you serve US customers (which they do) you need to abide by US financial rules.
- smcl 3y agoThis would also be an issue in the UK too - mixing client money with company money is a big no-no. I imagine plenty of other countries have similar regulations.
- smoovb 3y agoBinance US, separate entity, serves US customers. Binance from the article does not.
- pcthrowaway 3y agoWeren't those separate entities found to have comingled funds though?
- diab0lic 3y agoBinance from the article most certainly does: https://amp.cnn.com/cnn/2023/03/27/business/binance-cftc-lawsuit/index.html https://amp.cnn.com/cnn/2023/03/27/business/binance-cftc-law...
- deleted 3y ago[deleted]
- raverbashing 3y agoExcept this is more akin to "don't serve food that was left under room temperature for a day" than an arbitrary procedural US-rule.
- HissingMachine 3y agoNobody trusts banks, but these crypto characters make banks look like solid organizations.
- brookst 3y agoThe magic of banking is that retail depositors don’t have to trust them.
- mhluongo 3y agoEh, the FDIC is $250k per account, and total coverage in the fund is pretty small. I'd think we'd stop making blanket statements like this after seeing a couple large bank failures back-to-back in the US. If there are more, we won't be able to make all retail depositors while without significant additional tax revenue or currency debasement.
- nradov 3y agoNo, the FDIC can just levy additional fees on the remaining banks. There will be no additional currency debasement.
- toomuchtodo 3y agoHow many people would you presume are vs aren't covered by FDIC in full? In joint accounts, the limit goes to $500k. Sure, you've got some businesses with poor risk and treasury management who might be carrying a bunch of cash in a demand deposit account that isn't covered, but your vast majority of depositors will be fine.
- TSiege 3y agoThe rescue of Silicon Valley Bank implies to me that the $250k is more a suggestion than a rule
- brookst 3y ago$250k is guaranteed. Above that you take your chances on policy. I don’t think the $250k was ever intended to be an absolute upper limit.
- aww_dang 3y agoAre the improprieties of a cryptocurrency exchange more scandalous relative to the improprieties of traditional finance?
- BLKNSLVR 3y agoI'll say no, but only because cryptocurrency is a single toddler to traditional finance's group of cigar smoking, sociopathic men with the scars to prove they've learnt through experience how far they can stray from legal boundaries before too much attention is brought.
- aww_dang 3y agoFeels like tradfi's improprieties are normalized. They're adjacent to or in bed with government's financial abuses, which are politicized and sometimes portrayed as just.
- jmull 3y ago> "the term ‘deposit’ is a communication term, it’s not an indication of the technical treatment of the funds" That seems like a pretty terrible answer from binance. It's like they are saying, "We're not commingling customer funds and company revenue! We're defrauding our customers by misrepresenting purchases as deposits!"
- nologic01 3y agoIts a pity that a decade and more of hyperactivity, speculation and noise in cryptofinance will not leave much to show for it but the smoldering ruins of bizarre house-of-cards. We have financial systems that are certifiably broken, there are countless ideas about how to fix them, the digital era makes new ideas easy to explore and everybody would objectively be better off with some genuine innovation yet all we've got is this manic obsession spawned by bitcoin that has no economic objective whatsoever. If that is "efficient allocation of capital" one wonders what inefficiency looks like.
- Tyrek 3y agoIt's difficult to claim that any system is 'certifiably broken' until you can actually point to an actual effective real-world implementation of a 'better system' (pareto or otherwise), no?
- ouid 3y agoNo. What? Say you're trying to invent a lightbulb. The first one ever, and it explodes when you plug it in. How would you describe its state?
- hudon 3y ago"I have failed to invent a light bulb" Broken implies it was working to begin with, or can be compared to something that works, as the post you're replying to states.
- ouid 3y agoNo. Your attempt is now just shards of glass. It's borked. Before it was broken, it didn't work, but now its broken.
- hudon 3y agosure, but the thing that's broken was just that, a "thing". It wasn't a "lightbulb", because it was never able to produce light. It's a broken "bulb", at best, and that's a correct use of the word "broken", because it can be compared to other bulbs that aren't broken, in this case the glass bulb itself.
- JAlexoid 3y agoFor all the great promises and actually great ideas behind using cryptography to ensure efficient flow of funds... it has become scammers' paradise.
- jandrese 3y agoBitcoin is many things, but "efficient" has never been one of them. Today if you wanted to send $10,000 to someone in a different country it would be less wasteful and environmentally harmful to cut down a tree and process it into cardboard, put the cash in that cardboard box, and put that on a fossil fuel burning airplane to fly it halfway across the world and hand deliver it to the person.
- londons_explore 3y agoThere is no business advantage to co-mingling funds... So why do it? The only benefit appears to be that you don't need to do precise/accurate accounting and it's easier to hide fraud.
- ineedasername 3y agoIn this case the business advantage may simply have been that it was much easier to avoid following the rules while growing from its start 2017 to (at times) > $50B in holdings. They simply didn't care enough to devote the resources needed, i.e., apathy (and even antagonism) towards the normal business protocols. That's assuming it wasn't done for less honest purposes.
- 3j0hn 3y ago[flagged]
- londons_explore 3y agoI never understood why commingling was illegal. Instead, simply require that if any customer funds and corporate funds are in the same account, then customers have priority in any liquidation of the contents of that account. Then, companies have an incentive to separate their funds, but don't need to.
- runako 3y ago> I never understood why commingling was illegal. The answer is straightforward. It is obviously possible to spend all of the money in an account. This is bad if some of that money was customer money which the fiduciary was not supposed to spend. Spending all the money in an account can be the result of bad business decisions. But equally, it can be the result of a series of negative events. For example, a business line of credit could pledge as security funds in an account. Later, the business runs into trouble due to rare macro events (e.g. war, pandemic, natural disaster, etc.) and the loan goes into default. The creditor can then seize the funds in the account. It is better for customers if that pledged account did not contain their money. > customers have priority in any liquidation of the contents of that account. Neither of the scenarios above results in the ability to prioritize in any kind of orderly liquidation. Bankruptcy will likely come eventually, but by the time the courts get involved all the customer funds are gone and unrecoverable. Preventing commingling provides a mechanism for the fiduciary to fail without having lost all of the customers' money.
- fdsafdsafdsklj 3y agoCustomers have priority of the assets anyway, even if they're in a corporate account. The commingling rules help because by the time the funds in any commingled account would get frozen they'd already be gone. Look to SBF, Madoff, etc.
- sph 3y agoReading these comments on this radical anti-crypto forum makes me always think of "the rumours of [Bitcoin's] death have been greatly exaggerated." While I don't have a Twitter profile with laser eyes just yet, I enjoy seeing what I think is a technological and political game changer just chugging along, uncaring of scams, maxis, haters, governments, volatility. I am surprised that few can notice how impressive it is for a currency with limited usability and extreme volatility to still be worth something, improving and growing. Because at one point, all the concerns one has about it will have been solved, and, as economists love to say, good money tends to drive out bad money. The Internet is still in need of its digital cash. So I enjoy seeing all the Ponzi schemers, con artists and grifters get their comeuppance, but would also love to see the crypto-Luddites inhabiting this forum to be proven wrong eventually. Because Bitcoin doesn't care, Bitcoin still goes brrr.
- robin_reala 3y agoAnd will go brr until self-induced climate change kills off the human race. Proof-of-work coins are obscene and immoral, and you should feel bad.
- sph 3y agoYes, Bitcoin is what is causing climate change. Also stop eating meat. You're repeating the propaganda lines from big corporation and big government, while they keep subsidizing oil companies and ultra-rich take their private jet to have dinner in Paris. Also it feels good to believe climate change is within our (we the people) grasp, and we just have to recycle a bit more. This is literally putting the masses at each other's throats, while Unilever hopes to make billions if you buy their vegan products, and petrol companies go brrr. Divide et impera. -- Bitcoin turns energy into money. The problem is that we need more clean energy, not cry that people are using off-grid energy to mine Bitcoins. Build more nuclear. Invest in fusion research. But you nor I can't, so we're at each other's throat. Saying we need to consume less energy is misguided and absurd.
- robin_reala 3y ago
- asin 3y agoThat's how businesses are run in 21st century. Lol I bet US gov will go after binance/coinbase at some point this/next year
- SkyMarshal 3y agoThey’re already going after Coinbase. https://www.reuters.com/legal/coinbase-issued-wells-notice-by-sec-2023-03-22/ https://www.reuters.com/legal/coinbase-issued-wells-notice-b...
- charcircuit 3y agoMoney is just a number in a database. Who cares if that number is over 1 account or split over more. It is equivalent.
- im3w1l 3y agoYeah I'm inclined to agree. They shouldn't have done it, but this seems to be a case sloppiness rather than malice, and nothing actually bad seems to have came of it from my cursory reading. Just a bunch of playing up what could have happened.
- figassis 3y ago> Binance’s website told customers their dollar transfers were “deposits” that would be “credited” to their trading accounts in the form of BUSD. Customers were told they could “withdraw” their deposits as dollars. These representations created the expectation that clients’ funds would be safeguarded in the same way as traditional cash deposits, the former regulators said. So this makes sense to me in that users buy a deposit dollars to buy a shitcoin, but the deposit and purchase are a single operation. If I buy BUSD and then I want to withdrawn, I need to sell my BUSD back to Binance, and it it's value has drifted down, then I will get less dollars. How is that commingling and how is there ab expectation of safeguarding deposits?
- worksonmine 3y agoThey've ramped up e-mail spam to the point that I unsubscribed and am going to delete my account. Can't be a good sign, be careful.
- sub7 3y agoMost crypto grifters have cashed out, moved on to other projects, and are keen for people to forget that chapter. There is still a monumental amount of notional markups that need to be erased - this is not a real market and there is no real price discovery. The real $ have been round tripped many times over, I don't think there's a single "stablecoin" out there that's worth any constant amount.