Binance, the largest crypto exchange by market capitalization, is increasingly facing negative news following the crash of its competitor FTX.
Investors therefore withdraw large sums from the stock market. However, Changpeng Zhao, the CEO of Binance, dismisses the allegations circulating on Twitter and news sites. Are the fears of the crypto community justified?
Several media outlets and Twitter users accuse the company of money laundering and targeted misinformation about its reservations, among other things. In a general response to the current allegations, Changpeng Zhao wrote on Twitter:
“Ignore FUD (Fear, Doubt, Uncertainty). Grows further.
Crypto investors still seem to be losing faith in the stock market. Crypto analytics firm Nansen reports that $3 billion worth of cryptocurrencies were dumped from the exchange on December 13.
But what exactly are the media and the crypto community accusing Binance of? And are these claims justified?
Does the stock market have enough reserves?
After the collapse of the FTX crypto exchange, rival companies decided to release reserve proofs. FTX misused client funds and also made false claims regarding its activities. To calm the shocked crypto community, many crypto exchanges have started independent investigations.
Binance has also conducted an independent audit of its reserves. Result: customer deposits are approximately 100% covered. According to the audit, the stocks of the crypto exchange even slightly exceed those of customer funds. However, the reserve report raises a number of other questions.
so criticized Octopus CEO and the old SEC Chief Stark Binance Reports. The company submitted its inventories, but not liabilities and other data. Also, inventories of several smaller cryptocurrencies and evidence of issuing their own cryptocurrencies BNB, BTC, and BUSD are lacking.
Last but not least, that’s it Evidence of reserves is just a snapshot. Since funds may be borrowed on a short-term basis, beneficial ownership of declared reserves cannot be proven one hundred percent using this method..
The crypto community also seems skeptical about reserves and would like to see even more transparency from the exchange. After the FTX crash, this is now putting Binance to the test. There is no response to Binance’s concerns at the time of the article’s publication.
However, Changpeng Zhao noted the withdrawals and hailed a possible “stress test” for centralized exchanges on Twitter:.
Binance Handles Switch Storms With Ease
As CZ explained in a tweet on December 14, the previous day’s change rush didn’t even make the top 5 of all Binance rushes. For example, the Terra Luna crash as well as the FTX crash would have resulted in more withdrawals than the 14th for the exchange.
To appease investors and calm their nervousness a bit, the CEO of Binance added that the situation has now stabilized, easing investor concerns:
“The soles are coming back.”
Previously, even Bloomberg reported about $2 billion in Binance withdrawals. However, the numbers could now be more than five billion US dollars.. Either way, apparently Binance handled the onslaught without much effort, or as CZ put it:
“As per usual.”
Coinbase CEO Brian Armstrong also took the opportunity to in a tweet to promote your business:
“There is a lot of fear in the markets right now. Users need to remember how different Coinbase is in times like these right now.
Yet Binance remains the market leader due to its significantly lower transaction fees, larger number of asset pairs, and wider range of income opportunities..
Many expected (or even hoped) for a flash crash of the Binance-owned BNB asset. However, it survived the short rush without any issues and is even now trading at a plus 2.3%.
Reuters accuses Binance of money laundering
On Monday, December 12, 2022, news portal Reuters published an article containing serious allegations against Binance. Reuters claims that Binance is involved in money laundering and violations of US sanctions, according to insiders.
Binance allegedly helped criminals launder billions of US dollars and provided a platform for Iranian traders despite current sanctions. Proceedings against the company have been ongoing in the United States since 2018. Members of the crypto community fear a potential foreclosure on US exchanges.
Binance Coin (BNB) price reacted with a short-term price decline and fell from US$283 to US$272 shortly after the news article was published, but has since recovered somewhat.
Remarkably, these allegations have existed since the start of the trial. So far, authorities have reportedly deliberately hindered further investigations into Binance. While some lawyers are calling for an immediate and aggressive prosecution, others are stopping it because the evidence is still unclear. Reuters also accused the exchange of not doing enough to combat money laundering.
Binance’s CEO retweeted a blog post accusing the company of spreading misinformation. The article also describes the expansion and cooperation of the “Intelligence and Investigation” department. According to the exchange, the department’s workforce grew fivefold in 2022, and it also handled 47,000 law enforcement requests. As far as cooperation with the authorities is concerned, the exchange does indeed seem to show good will.
Although the company denied any involvement in delaying law enforcement investigations, it did not explicitly respond to Reuters’ allegations for strategic reasons. According to News magazine, however, an out-of-court settlement between US authorities and Binance may take place.
If the crypto exchange pleads guilty, it could get away with a hefty fine, according to Reuters. The news magazine relies on Binance’s legal team. Alternatively, however, the proceedings can also be interrupted or lead to an indictment. A possible blockage of the company in the United States is still speculation and probably rather unlikely.
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