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Former Insiders Allege Binance, Commingled Client Assets and Company Revenue

Reuters | Angus Berwick and Tom Wilson | May 23, 2023

Binance money flows bank records and insider interviews - Former Insiders Allege Binance, Commingled Client Assets and Company Revenue

According to sources familiar with the matter, Binance, the world's largest cryptocurrency exchange, is alleged to have commingled customer funds with company revenue in 2020 and 2021.

  • Potential Breach of U.S. Financial Rules:
    • This practice breaches U.S. financial rules that mandate customer money to be kept separate.
    • The sums in question reportedly run into billions of dollars, and commingling allegedly happened almost daily in Binance's accounts held at U.S. lender Silvergate Bank. This lack of separation potentially puts client assets at risk by obscuring their whereabouts​.
  • Binance's Response:
    • Binance has denied the allegations, stating that the accounts in question were not used to accept user deposits but were used to facilitate user purchases of crypto.
    • The company asserts that there was no commingling because these accounts held 100% corporate funds. When users sent money to the account, they were buying Binance's bespoke dollar-linked crypto-token, BUSD, according to a Binance spokesperson​.

See:  Binance Withdraws from Canadian Market due to Tightened Crypto Regulations

  • Contradictions in Binance's Claims:
    • Despite Binance's assertions, previous representations by the exchange to its customers characterized the transfers as deposits, undermining Binance's current explanation.
    • Furthermore, the U.S. Commodity Futures Trading Commission has alleged that Binance allowed U.S. customers to trade on its platform from 2019 to this year, despite publicly claiming to restrict access to Americans. Binance has responded by stating that it blocks U.S. users​.

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NCFA Jan 2018 resize - Former Insiders Allege Binance, Commingled Client Assets and Company RevenueThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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