The court drama between the US financial regulator SEC and the world’s largest crypto exchange continues. A central question: How safe are the assets on Binance? At the hearing yesterday, September 18, 2023, new explosive allegations of customer money embezzlement came to light.
In its complaint, the SEC presented questionable examples of the mixing and misappropriation of customer funds at Binance.US (more on this here). Court documents from yesterday’s hearings present new allegations. The head of the exchange, CZ, borrowed $250 million from one of his companies, paid for with his own stablecoin, BUSD. He then sent most of it to BAM Trading, the parent company of Binance.US. In addition, according to the SEC, an auditor is said to have had great difficulty certifying that the assets were fully covered.
[Es] was difficult and sometimes not possible to retrieve wallet balances en masse at a historical point in time. This makes it very difficult to ensure that the company is fully protected at any given time.
Auditor according to the SEC
Binance custodian in the firing line
The Ceffu company also seems to have come into focus. It was founded in 2021 and is responsible for the custody of Binance’s assets. According to the SEC, it was registered under the name Bifinity in Lithuania. According to the SEC, CZ and two other employees are said to be the sole owners. This would violate a deal between Binance and the US financial regulator, as Binance.US must be independent of Binance and custody is guaranteed locally in the USA.
The judge denied the SEC’s request for full access to the cryptocurrency exchange’s records at the hearing. However, Binance should release more information about its custody and cooperate better with financial regulators. He is “not very convinced that BAM Trading has full control over the assets”.
VC investor and expert Adam Cochran wrote on Twitter about the new allegations: “Binance is not solvent.” This is the only way he can explain the opaque chaos and the auditor’s problems. A Binance insider from Europe, who wishes to remain anonymous, told BTC-ECHO in July 2023: “It is questionable to me whether customer and company assets are even separated. Even the employees don’t know how, where and by whom the assets are stored.”
Mass layoffs occurred at Binance.US last week. Over a hundred employees had to take their hats off. Some senior executives resigned, including the CEO, the legal chief and the risk officer.
Binance is also in court with the CFTC, the US Trade Commission. In addition, rumors have been growing for months that the Ministry of Justice will soon take action against the stock exchange. The next hearing will take place on October 12, 2023.
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