In a recent twitter “ask me anything” (AMA), Binance chief Changpeng Zhao admitted that Binance.US accepts international clients, shedding some light on whether the American counterpart’s assets are commingled with the global exchange.
“The recent [Binance] US to Binance.com international transactions… Binance.US accepts international clients,” said Zhao. “They are market makers that work on both, they transfer funds.”
Zhao’s comments follow the growing concern that Binance is not as transparent with its books as it projects to be, with its former CFO reportedly never seeing the firm’s full books during his three-year stint.
In a piece written by Dirty Bubble Media–whose report on FTX and Alameda was instrumental in exposing the crypto firms–the platform has shifted its focus to Binance, claiming that the exchange is freely exchanging assets with Binance.US in an attempt to skirt American regulatory laws.
“We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets,” the report said.
The piece cited Twitter user @jconorgrogan who has been monitoring Binance.US transactions since the platform halted withdrawals of the Tether stablecoin (USDT). During this time, the USDT balance in the primary Binance.US wallet fell to its lowest level ever ($197,000).
Recently, it was observed that withdrawals resumed after Binance.US received a single $10 million USDT transfer from an undisclosed address. Those funds were then transferred from two well-known Binance exchange wallets.
“However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange!” Dirty Bubble Media claimed.
Zhao, however, disputed the claim as merely “FUD”–a shorthand for fear, uncertainty, and doubt.
But now, as Zhao himself admitted, Binance.US transferring “international market maker” funds to the global Binance.com poses additional concerns–mainly on the possibility that the world’s largest crypto exchange is just using the firm to circumvent regulations.
As Dirty Bubble Media outlined, Zhao’s admission confirmed that transactions between Binance and its US counterpart exist–adding a layer of credibility to the outfit’s report on Binance.US transferring over $1 billion in assets to the offshore Binance.
“[Zhao] states this is market making. This means US customer assets are trading on offshore Binance,” the blog site said in a twitter thread.
Binance was banned in the United States in 2019 due to regulatory concerns as some lawmakers believe the crypto assets that the trading platform offers were essentially securities. Binance and other investors responded by launching Binance.US, a separate exchange meant to comply with all applicable US federal regulations, but which is nonetheless prohibited in six states: Hawaii, Idaho, Louisiana, New York, Texas, and Vermont.
In many instances, Binance has maintained that the US counterpart shares the name and license for the brand, but is essentially managed independently of the global parent firm.
Zhao’s admission, for Dirty Bubble Media, confirms their report, even after the Binance chief blocked the blog’s twitter account after publishing it.
“This will only raise regulatory pressure on their firm, and raises questions about how market makers controlled by Binance itself are using customer assets,” Dirty Bubble Media tweeted, adding that it is essentially the same setup with how now-bankrupt crypto firms FTX and Alameda Research have commingled their funds.
Transparency concerns are being raised on how Binance conducts its business, especially after Zhao has been consistently preaching about his firm’s commitment to “transparency.” Auditing firm Mazars, which Binance tapped to conduct an Agreed-Upon Procedures engagement for the firm, seems to have deleted the page from its website that displayed the results. The report was supposed to have confirmed what the exchange released earlier: that it has a 101% reserve ratio, enough to cover customer balances on the platform.
The auditing firm said that it performed an Agreed-Upon Procedures engagement in accordance with the International Standard on Related Services (ISRS) 4400 (Revised). Under item 6, however, the rules of procedure specified that such engagement is “not an audit, review, or other assurance engagement.”
In a recent letter on the Binance blog, Zhao said that he is “proud to say that Binance has been and will remain at the forefront” of regulatory compliance.
“Having secured licenses and registrations in 14 jurisdictions spanning five continents as of the end of this year, Binance has proved our commitment to holding ourselves to the highest regulatory standards,” Zhao wrote.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.