Key Takeaways
- Reuters allege that Binance mixed corporate revenue with customer funds on a daily basis, in accounts held at the now-bankrupt Silvergate Bank
- Binance’s chief of communication, Patrick Hillmann, stated that the allegations were based on user deposit-based USD minting, where users purchased a stablecoin redeemable by Paxos
World’s largest crypto exchange Binance has come under media limelight again but this tiem for negative reasons. A Reuters report based on information from three insiders familiar with Binance’s finances, suggested that Binance mixed corporate revenue with customer funds on a daily basis, particularly in accounts held at the now-bankrupt Silvergate Bank.
The report indicated that the amount involved in this commingling reached billions of dollars. The exchange has however firmly denied the claims of commingling customer funds with company revenue, which would potentially violate US banking regulations that mandate the segregation of client money.
According to the allegations, funds from Binance users were reportedly sent to a Silvergate account belonging to Key Vision Development, a company owned by Binance’s CEO, Changpeng Zhao. Binance allegedly informed Silvergate that the primary function of the Key Vision account was to collect dollar contributions from non-US clients.
Additionally, the report claimed that another Silvergate-based account connected to a Cayman firm owned by the Binance CEO was used to convert money into the dollar-linked token Binance USD (BUSD). However, it is worth noting that Reuters did not find any evidence suggesting the loss or misappropriation of Binance client funds.
Binance’s chief of communication, Patrick Hillmann, took to Twitter to dismiss the Reuters report as “1000 words of conspiracy theories.” He clarified that the allegations were based on user deposit-based USD minting, where users purchased a stablecoin redeemable by Paxos, as clearly stated on the relevant page.
In response to queries regarding fund-comingling, Hillmann reiterated that Binance has previously addressed this issue and emphasized the separation of user and corporate funds on distinct ledgers.
“We keep our user and corporate funds on completely separate ledgers. There is declining ROI on responding to these types of tabloid stories. We know who their sources are and Reuters will be embarrassed when it becomes public”.
These allegations against Binance come amidst the firm facing increasing regulatory scrutiny. Earlier this year, the United States Commodity Futures Trading Commission has filed suit against Binance and CEO Changpeng “CZ” Zhao for trading violations.
In March, A U.S. Securities and Exchange official stated that the regulatory body believes Binance.US is operating an unregistered securities exchange in the U.S., adding that they believe the sale of VGX tokens by Voyager Digital violated federal securities laws.
