Binance, the world’s largest cryptocurrency exchange, has pooled billions of dollars from its own cash with customer funds, sources familiar with the matter told Reuters. The alleged practice, which would have occurred between 2020 and 2021, would violate the requirement of the US capital market and would demonstrate, according to experts, a lack of internal controls by the company.
According to a report published on Tuesday (23), one of the sources heard said that customer funds were mixed with the brokerage’s assets almost daily in accounts at the US bank Silvergate, one of those that went into crisis in March of this year.
Similar concerns were raised in the case involving FTX, which went bankrupt in November after stealing client funds. According to Reuters, however, there is no evidence that Binance user values have been embezzled.
It is not known how often or the exact amount moved in the infraction episodes, but there are some examples. On February 10, 2021, says Reuters, Binance mixed $20 million from its balance sheet with $15 million from customer deposits.
In a statement to Reuters, Binance denied mixing deposits with company funds. “These accounts were not used to accept deposits from users; they were used to facilitate purchases [de criptos] made by users,” said spokesperson Brad Jaffe.
“There was no mixing at any time because they are 100% corporate funds”, he said, noting that the customer funds that appear in the statements were not deposited directly by users, but by Binance. The money, she said, would be a guarantee for issuing the token. BUSD, indexed to the dollar. “Exactly the same thing as buying a product from Amazon,” Jaffe said.
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Silvergate, which is in the process of shutting down operations, declined to comment on the case.
Former US regulators heard by Reuters say Binance’s justification is not supported by previous statements by the exchange itself.
Between the end of 2020 and throughout 2021, the company’s website carried a message saying that transfers in dollars were “deposits” that would be “credited” to their accounts in the form of BUSD. Users were also informed that they could “redeem” their deposits in dollars.
For experts consulted by the report, the language used by the company would have created the expectation that customer funds would be protected in the same way as common bank deposits.
To Reuters, Binance stated that the terms used were for communication purposes only, and did not refer to the technical treatment given to the money.
Escape from banks
Also according to the report, Binance bank data for 2021 show the purchase of BUSD tokens using resources from the analyzed accounts. Two sources who spoke to the outlet on condition of anonymity said that at least one of the brokerage’s Silvergate accounts was used to receive deposits from clients. Binance also denies this.
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Another person with knowledge of Binance’s inner workings further stated that the CEO, Chinese-Canadian Changpeng “CZ” Zhao, would have high distrust of banks and fear that the company’s resources would eventually be frozen – hence the desire to convert dollars into cryptocurrencies. .
Last year, Binance had BRL 450 million blocked in court amid a dispute with fintech Capitual, which, until around 2022, was the bridge between the exchange and the Brazilian banking system. In this month of May, the brokerage obtained a favorable decision to recover a good part of the amountbut the São Paulo Court of Justice (TJ-SP) suspended the decision a few days later.