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SEC Accuses Binance of Mishandling Funds and Lying to Regulators

194 points by pyrophane 3y ago

madars 3y ago
Archive: https://archive.is/IciUF https://archive.is/IciUF
johntiger1 3y ago
Surprise, surprise. Won't be long til we see CZ go the way of SBF
- b0sk 3y ago
  I wonder if SBF provided them some evidence/hints. CZ was one of the reasons that accelerated FTX's demise.
  - JeremyNT 3y ago
    Maybe not SBF specifically, because he seems to be too stupid to cut a deal, but the whole crypto space appears to be a den of thieves where secrets were poorly kept. I imagine that many players in his orbit knew at least generally what CZ and the other exchanges were up to. Now that the feds seem to be giving a hoot about these scams, they shouldn't have much trouble flipping people and rolling up the chains to the bosses on the other exchanges too.
- raverbashing 3y ago
  Maybe he's slightly smarter than SBF and will self-retire to a non-extradition jurisdiction
  - ipnon 3y ago
    If he’s already in China there is no risk of extradition for him.
    - johntiger1 3y ago
      he's canadian iirc (i think the richest one right now, actually)
      - graeme 3y ago
        To be rich means you actually have fungible assets you can trade for things. I do not expect CZ could get anywhere near his reported $15 billion. I do not think he could get and keep more than one billion. SBF didn’t that’s for sure.
        raverbashing 3y ago
        I certainly would be more than happy with $1Bi, heck even with 1/100 of that I'd be happy
        graeme 3y ago
        I was suggesting his net worth will probably be whatever you get to keep after bankruptcy. Not more than $1 billion doesn’t mean anything close to it. And he’ll be in jail to boot.
pyrophane 3y ago
> The Wall Street regulator said Binance had been mixing “billions of dollars” in customer funds and secretly sending them to a separate company called Merit Peak Limited, which is controlled by Binance’s founder, Changpeng Zhao. This sounds very much like what FTX was accused of doing.
- belter 3y ago
  "Happy the man who has learned the cause of things and has put under his feet all fear, inexorable fate, and the noisy strife of the hell of greed." - Publius Vergilius Maro
belter 3y ago
"The S.E.C. said the world’s largest cryptocurrency exchange mixed “billions of dollars” in customer funds and secretly sent them to a separate company controlled by Binance’s founder, Changpeng Zhao."
fourseventy 3y ago
[flagged]
- guru4consulting 3y ago
  just can't resist. here we go: https://web3isgoinggreat.com https://web3isgoinggreat.com :)
- EdwardDiego 3y ago
  This is good for Bitcoin. Few understand.
charcircuit 3y ago
>We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk What risk is being alleged? That people could trade things they wanted at a price they agreed to?
- JumpCrisscross 3y ago
  > What risk is being alleged? Have we already forgotten FTX?
- seanhunter 3y ago
  The allegation is that customer funds were inappropriately used/commingled by Binance entities, putting customers at risk of loss. That's the primary risk they're talking about. People getting scammed by inappropriate marketing of unregulated securities is a secondary risk. People losing money due to market abuse is a tertiary risk.
  - charcircuit 3y ago
    What's the risk of commingling? As long as the balances are recorded you can undo the commingling.
    - dghlsakjg 3y ago
      There is the legal risk (it's illegal). Also, its a bad practice for, well, a lot of reasons. You assume that all balances are positive, and that they haven't used that account for auditing purposes, or to commit some plain old investor fraud by claiming to have more cash than they do. What happens if the balances aren't recorded accurately? There's a million reasons that commingling funds is incredibly bad practice.
      - deleted 3y ago
        [deleted]
    - seanhunter 3y ago
perardi 3y ago
“Cryptocurrencies can work, we’ve just never had a properly decentralized system yet” is becoming the “Communism can work, we just haven’t really tried it yet”. This is yet another example of the crypto boom going bust, which has been a series of unregulated and utterly opaque exchanges collapsing. Over and over again, the entire ecosystem has been snake oil salesmen, who are selling snake oil to other snake oil salesmen. And the crypto purists will cry “oh, but Bitcoin, it would work if we all held dear to the purity of the concept and kept our relevant info in lockboxes in our panic rooms!” And the cynical, but also correct, among us will mutter “well that’s cool, but no normal human is going to do that, and the valuation of whole thing is based on mass uptake, and that’s contingent on having middlemen do a lot of the ugly gruntwork, because otherwise it’s far too difficult for normal users to ever bother with.” And those middlemen are, again, invariably, snake oil salemen who will cut and run.
- hiatus 3y ago
  > which has been a series of unregulated and utterly opaque exchanges collapsing It seems the issue with Binance was that it was running afoul of regulations. In what way is that "unregulated"?
  - JumpCrisscross 3y ago
    > the issue with Binance was that it was running afoul of regulations. In what way is that "unregulated"? “Blatant disregard of the federal securities laws and the investor and market protections these laws provide” means acting unregulated, even if one is properly subject to regulation [1]. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
- deleted 3y ago
  [deleted]
- mhluongo 3y ago
  Bitcoin is working. Ethereum is working. In what world do you think that "Bitcoin working" implies all centralized bad actors are washed out? All middleman are toast? This stuff takes time, and the existence of middlemen doesn't negate the premise that blocks keep being mined without censorship.
gadnuk 3y ago
> In one instance, the Binance chief compliance officer messaged a colleague that, “[w]e are operating as a fking unlicensed securities exchange in the USA bro.” Source: https://twitter.com/JohnReedStark/status/1665748594421297152 https://twitter.com/JohnReedStark/status/1665748594421297152 Is there any player in this space that plays by the rules? CZ going the way of SBF. Tether next?
- ProjectArcturis 3y ago
  If you played by the rules, you would have already lost out to the cheaters.
  - wmf 3y ago
    Yep, this is the story of Gemini.
    - DANmode 3y ago
      They were/are a Tether exchange, right?
      - wmf 3y ago
        No, they use real USD.
- llamataboot 3y ago
  Tether /is/ the main (fraudulent) player
  - onlyrealcuzzo 3y ago
    Interesting that Tether and BitFinex have always been the worst and most corrupt, and are somehow last in line...
    - llamataboot 3y ago
methodical 3y ago
Every time a crypto article is posted there are one of two people in the comments; those acknowledging yet another failure in a continuous display of cryptocurrency's blatant inability to be a valid currency, and those who mindlessly still think there's any hope for cryptocurrency to be a global currency. Those who say that CEXs aren't part of the core values of cryptocurrency are right, except also completely ignorant to the fact that without CEXs, crypto's usability as a currency is practically 0. CEXs have failed, hardware wallets have failed, soft wallets have failed, seed phrases are fundamentally problematic, etc. Cryptocurrency won't ever be functional on a large-scale as a global currency, and that much is evident. It's not even a matter of opinion; the core idea of decentralization which "makes crypto great" makes it unusable as a currency for the vast majority of people- who would need to rely on some centralized authority in order for crypto to operate within the real world. Anybody left in the space must just be hanging onto greater fool theory, that or has drank the kool-aid.
- DigiDigiorno 3y ago
  Every time a crypto article is posted there are a large amount of people who are only capable of thinking in absolutes like you.* I don't think it's a very good currency (in the tx time/volume sense), but I think viewing crypto's viability as an all-or-nothing game is unreasonable--that includes both those for it and those against it. As for your assertions about failures: - CEXs have failed (in the worst way possible too, see MtGox, BTC-e, FTX), but that doesn't mean they have all failed--or that there isn't a future for them. - Hardware wallets haven't failed at all really. Like, Trezor and Ledger are the largest I think, and those are fine AFAIK. Are you referring to Ledger's recent news with the optional update including a backdoor for those that want to sync keys with Ledger's new service? (Seems like a dumb business decision imho, seems oxymoronic--hardware wallet as a service? lol) - Soft wallets have been hacked and are risky, but I think the success rate here is pretty high. A large percent of crypto users use soft wallets like Brave's Wallet and MetaMask, the vast majority of these are fine AFAIK. Not exactly safe IMO, but considering the amount of people who use them and haven't been hacked, this is certainly not an obvious "failure" Also, unrelated to crypto, but reducing people who disagree with you to "kool-aid drinkers" and "accidentally correct people" is a negative life choice IMO * I think you are capable of not thinking in absolutes, I just wanted to be mean on the internet
booleandilemma 3y ago
"On the surface, we cannot be seen to have U.S. users but in reality, we should get them through other creative means," a Binance executive wrote in an internal message excerpted in the complaint. Nice.
- sdfghswe 3y ago
  It's scumbags all the way down.
mangecoeur 3y ago
shocked picachu meme

194 points by pyrophane 3y ago

madars 3y ago

Archive: https://archive.is/IciUF https://archive.is/IciUF

johntiger1 3y ago

Surprise, surprise. Won't be long til we see CZ go the way of SBF

b0sk 3y ago
I wonder if SBF provided them some evidence/hints. CZ was one of the reasons that accelerated FTX's demise.
- JeremyNT 3y ago
  Maybe not SBF specifically, because he seems to be too stupid to cut a deal, but the whole crypto space appears to be a den of thieves where secrets were poorly kept. I imagine that many players in his orbit knew at least generally what CZ and the other exchanges were up to. Now that the feds seem to be giving a hoot about these scams, they shouldn't have much trouble flipping people and rolling up the chains to the bosses on the other exchanges too.
raverbashing 3y ago
Maybe he's slightly smarter than SBF and will self-retire to a non-extradition jurisdiction
- ipnon 3y ago
  If he’s already in China there is no risk of extradition for him.
  - johntiger1 3y ago
    he's canadian iirc (i think the richest one right now, actually)
    - graeme 3y ago
      To be rich means you actually have fungible assets you can trade for things. I do not expect CZ could get anywhere near his reported $15 billion. I do not think he could get and keep more than one billion. SBF didn’t that’s for sure.
      - raverbashing 3y ago
        I certainly would be more than happy with $1Bi, heck even with 1/100 of that I'd be happy
        graeme 3y ago
        I was suggesting his net worth will probably be whatever you get to keep after bankruptcy. Not more than $1 billion doesn’t mean anything close to it. And he’ll be in jail to boot.

pyrophane 3y ago

> The Wall Street regulator said Binance had been mixing “billions of dollars” in customer funds and secretly sending them to a separate company called Merit Peak Limited, which is controlled by Binance’s founder, Changpeng Zhao. This sounds very much like what FTX was accused of doing.

belter 3y ago
"Happy the man who has learned the cause of things and has put under his feet all fear, inexorable fate, and the noisy strife of the hell of greed." - Publius Vergilius Maro

belter 3y ago

"The S.E.C. said the world’s largest cryptocurrency exchange mixed “billions of dollars” in customer funds and secretly sent them to a separate company controlled by Binance’s founder, Changpeng Zhao."

fourseventy 3y ago

[flagged]

guru4consulting 3y ago
just can't resist. here we go: https://web3isgoinggreat.com https://web3isgoinggreat.com :)
EdwardDiego 3y ago
This is good for Bitcoin. Few understand.

charcircuit 3y ago

>We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk What risk is being alleged? That people could trade things they wanted at a price they agreed to?

JumpCrisscross 3y ago
> What risk is being alleged? Have we already forgotten FTX?
seanhunter 3y ago
The allegation is that customer funds were inappropriately used/commingled by Binance entities, putting customers at risk of loss. That's the primary risk they're talking about. People getting scammed by inappropriate marketing of unregulated securities is a secondary risk. People losing money due to market abuse is a tertiary risk.
- charcircuit 3y ago
  What's the risk of commingling? As long as the balances are recorded you can undo the commingling.
  - dghlsakjg 3y ago
    There is the legal risk (it's illegal). Also, its a bad practice for, well, a lot of reasons. You assume that all balances are positive, and that they haven't used that account for auditing purposes, or to commit some plain old investor fraud by claiming to have more cash than they do. What happens if the balances aren't recorded accurately? There's a million reasons that commingling funds is incredibly bad practice.
    - deleted 3y ago
      [deleted]
  - seanhunter 3y ago

perardi 3y ago

“Cryptocurrencies can work, we’ve just never had a properly decentralized system yet” is becoming the “Communism can work, we just haven’t really tried it yet”. This is yet another example of the crypto boom going bust, which has been a series of unregulated and utterly opaque exchanges collapsing. Over and over again, the entire ecosystem has been snake oil salesmen, who are selling snake oil to other snake oil salesmen. And the crypto purists will cry “oh, but Bitcoin, it would work if we all held dear to the purity of the concept and kept our relevant info in lockboxes in our panic rooms!” And the cynical, but also correct, among us will mutter “well that’s cool, but no normal human is going to do that, and the valuation of whole thing is based on mass uptake, and that’s contingent on having middlemen do a lot of the ugly gruntwork, because otherwise it’s far too difficult for normal users to ever bother with.” And those middlemen are, again, invariably, snake oil salemen who will cut and run.

hiatus 3y ago
> which has been a series of unregulated and utterly opaque exchanges collapsing It seems the issue with Binance was that it was running afoul of regulations. In what way is that "unregulated"?
- JumpCrisscross 3y ago
  > the issue with Binance was that it was running afoul of regulations. In what way is that "unregulated"? “Blatant disregard of the federal securities laws and the investor and market protections these laws provide” means acting unregulated, even if one is properly subject to regulation [1]. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
deleted 3y ago
[deleted]
mhluongo 3y ago
Bitcoin is working. Ethereum is working. In what world do you think that "Bitcoin working" implies all centralized bad actors are washed out? All middleman are toast? This stuff takes time, and the existence of middlemen doesn't negate the premise that blocks keep being mined without censorship.

gadnuk 3y ago

> In one instance, the Binance chief compliance officer messaged a colleague that, “[w]e are operating as a fking unlicensed securities exchange in the USA bro.” Source: https://twitter.com/JohnReedStark/status/1665748594421297152 https://twitter.com/JohnReedStark/status/1665748594421297152 Is there any player in this space that plays by the rules? CZ going the way of SBF. Tether next?

ProjectArcturis 3y ago
If you played by the rules, you would have already lost out to the cheaters.
- wmf 3y ago
  Yep, this is the story of Gemini.
  - DANmode 3y ago
    They were/are a Tether exchange, right?
    - wmf 3y ago
      No, they use real USD.
llamataboot 3y ago
Tether /is/ the main (fraudulent) player
- onlyrealcuzzo 3y ago
  Interesting that Tether and BitFinex have always been the worst and most corrupt, and are somehow last in line...
  - llamataboot 3y ago

methodical 3y ago

Every time a crypto article is posted there are one of two people in the comments; those acknowledging yet another failure in a continuous display of cryptocurrency's blatant inability to be a valid currency, and those who mindlessly still think there's any hope for cryptocurrency to be a global currency. Those who say that CEXs aren't part of the core values of cryptocurrency are right, except also completely ignorant to the fact that without CEXs, crypto's usability as a currency is practically 0. CEXs have failed, hardware wallets have failed, soft wallets have failed, seed phrases are fundamentally problematic, etc. Cryptocurrency won't ever be functional on a large-scale as a global currency, and that much is evident. It's not even a matter of opinion; the core idea of decentralization which "makes crypto great" makes it unusable as a currency for the vast majority of people- who would need to rely on some centralized authority in order for crypto to operate within the real world. Anybody left in the space must just be hanging onto greater fool theory, that or has drank the kool-aid.

DigiDigiorno 3y ago
Every time a crypto article is posted there are a large amount of people who are only capable of thinking in absolutes like you.* I don't think it's a very good currency (in the tx time/volume sense), but I think viewing crypto's viability as an all-or-nothing game is unreasonable--that includes both those for it and those against it. As for your assertions about failures: - CEXs have failed (in the worst way possible too, see MtGox, BTC-e, FTX), but that doesn't mean they have all failed--or that there isn't a future for them. - Hardware wallets haven't failed at all really. Like, Trezor and Ledger are the largest I think, and those are fine AFAIK. Are you referring to Ledger's recent news with the optional update including a backdoor for those that want to sync keys with Ledger's new service? (Seems like a dumb business decision imho, seems oxymoronic--hardware wallet as a service? lol) - Soft wallets have been hacked and are risky, but I think the success rate here is pretty high. A large percent of crypto users use soft wallets like Brave's Wallet and MetaMask, the vast majority of these are fine AFAIK. Not exactly safe IMO, but considering the amount of people who use them and haven't been hacked, this is certainly not an obvious "failure" Also, unrelated to crypto, but reducing people who disagree with you to "kool-aid drinkers" and "accidentally correct people" is a negative life choice IMO * I think you are capable of not thinking in absolutes, I just wanted to be mean on the internet

booleandilemma 3y ago

"On the surface, we cannot be seen to have U.S. users but in reality, we should get them through other creative means," a Binance executive wrote in an internal message excerpted in the complaint. Nice.

sdfghswe 3y ago
It's scumbags all the way down.

mangecoeur 3y ago

shocked picachu meme