Binance Trades “Sharper Than FTX”
According to many rumours, the world’s largest cryptocurrency exchange is working to build customer trust. Binance says it has processed $6 billion worth of withdrawals in the past 72 hours without “issues,” indicating the company’s strong financial position.
“We will commit to setting an example for the entire market by taking transparency seriously,” Binance CEO Changpeng Zhao (CZ) said last month as competitor FTX collapsed.
Changpeng Zhao, Founder and CEO of Binance, at the Viva Technology conference in Paris on June 16. Photo: Reuters
However, Reuters examined Binance’s corporate documents and found that the exchange had processed over $22 trillion worth of transactions that year, but its activities remained largely hidden from the public. Binance refuses to disclose the location of its headquarters. It also does not disclose basic financial information such as sales, earnings and cash reserves. They have their own symbol but do not reveal their role in the balance sheet. The exchange offers crypto lending and margin trading to clients, but does not set risk levels or reserve funds to ensure user withdrawals are not frozen like FTX does.
Experts point out that since Binance is not a publicly traded company like Nasdaq-listed Coinbase, it is not required to publish detailed financial reports. Industry data shows that Binance has not raised any outside funds since 2018, meaning there is no need to share financial information with outside investors. Binance is actively circumventing US regulatory scrutiny by forming new legal entities. CZ declined to sign off on the decision to create Binance America, saying the company was formed on the advice of leading legal experts.
Given its size, the exchange accounts for more than half of all cryptocurrency trading volume, putting the company under scrutiny from the US Department of Justice for money laundering and sanctions violations. Reuters She quoted several prosecutors as saying they had gathered enough evidence against Binance and some of the company’s executives.
John Reed Stark, former director of the US Securities and Exchange Commission’s (SEC) Office of Internet Enforcement, said: “Binance is looking for ways to appear legitimate. Their operations are even more obscure than most. FTH.” He said that this exchange was completely opaque without confirming the company’s financial position.
However, Binance Chief Strategy Officer Patrick Hillmann denied the allegations. He explained that financial reports are very complex and can take up to six months to complete. Hillmann also noted that they are privately held and are not required to disclose their finances. “We have no debt. The money we make from collecting transaction fees is completely separate from the user’s trading assets,” he said.
To ensure transparency, Binance hired Mazars to review bitcoin assets. In a Dec. 7 report, Mazars noted that the number of bitcoins held on Binance was less than the amount held by customers. However, Mazars later removed the ad. CZ also took to Twitter to confirm, “The inventory has been audited transparently.” Late last week, a Mazars representative stated that he had stopped auditing Binance without giving a reason.
Analysts, lawyers and accountants say this is not a complete audit, unable to present a company’s finances in as much detail as a traditional audit. “Binance Bank is really weak,” said John Todaro, a senior analyst at investment bank and asset manager Needham & Company.
Binance did not comment on the report. Reuters.
Tao Hien