Crypto Exchange Binance under scrutiny after FTX Crash: 5 Things You Need to Know
- Investors are concerned that Binance is showing signs of weakness after the shock collapse of FTX.
- The DOJ is investigating crypto exchange giant Bitcoin.
- As confidence in the crypto market plummeted, the CEO of the exchange warned staff about “bumpy” times ahead.
Customers drained billions of dollars from Binance’s crypto platform last week — just one reason the spotlight is glaring on the company in the wake of the FTX implosion.
Spooked investors should be on the lookout for signs of trouble after the collapseFTX is now bankrupt, once-$32 billionSam Bankman-Fried founded the crypto empire. Some worry that cracks could be appearing at Binance.
Here are 5 things you should know about Binance and why it’s causing such a stir in the crypto world.
People are concerned about Binance’s customer funds.
After FTX’s bankruptcy it became clear that they were not able to pay their bills. coffers were bareThe pressure on crypto firms to show customers their holdings was safe and pay up if they were harmed, led to them being forced to do so. rush of withdrawals.
Reuters reported that FTX’s Bankman Fried was also mentioned in the report. quietly transferred at least $4 billionFollowing losses, Alameda Research transferred its user funds to a sister trading firm Alameda Research.
Binance sought to boost its confidence in its own company by getting a “proof of reserves” report. It enlisted accounting firm Mazars to verify its holdings, to maybe reassure customers their funds are still in their accounts and not loaned out.
But legal experts othersThe platform’s users should not be satisfied with the Mazars Report, because it didn’t examine how well the financial controls were. Although it indicated Binance’s situation was stable, it also showed that there were bitcoin liabilities. $245 million bigger than assets, an the WSJ reported.
Nearly half the company’s $75 billion reservesAccording to a Bloomberg report, the currency’s stablecoin BUSD and native token binance coin (BNB) are included in the account.
Customers pulled $3 billion in funds in less than a day
Binance has seen heavy withdrawals in recent days as questions about its reserves and a DOJ investigation built. The meanwhile, the arrest of FTX founder Bankman-FriedCryptocurrency trust has been further eroded.
Tuesday saw Binance record its highest daily withdrawals since June. It had net outflows in excess of $3 billion in just 24 hours. Nansen data. The exchange was temporarily halted freeze withdrawalsThis is USD CoinWhile it increased its holdings of stablecoin.
Just over a year ago, the crypto giant had $69.5 billion worth of digital assets in publicly-disclosed wallets. according to Nansen. It stated that the total now stands at $54.7 billion because of large withdrawals and price fluctuations.
A DOJ investigation into Binance is focused on money laundering
Reports that the US Justice Department was investigating Binance for financial crimes related to Binance added fuel to the fire.
Prosecutors consideringWhether to file criminal charges against Changpeng Zhao, its founder, and other executives, according Reuters. These would include money laundering conspiracies, unlicensed money transmission and criminal sanctions violation.
Reuters estimated that Binance received more than $10 billion in illegal payments by 2022. The company claimed it tried to evade regulators. crypto giant disputed.
Binance CEO “CZ” isn’t fazed and says it’s business as usual
Zhao, commonly known as “CZ”, has doubled down on trying to easeCustomers worry about Binance’s liquidity. He’s pushed back against what he sees as “FUD” — the spread of baseless fear, uncertainty and doubt.
Binance allows users to withdraw 100% their assets. CNBC spoke to him on Thursday. He said that there won’t be any issues at all. “Crypto businesses must hold user assets individually, and that is what we do.”
Zhao spoke earlier in the week. shrugged offThe exchange’s heavy outflows were seen as “business as usual”. Binance lifted the USDC withdrawals ban and he welcomed these events as a credibility-building event “stress test” of the exchange’s resilience.
But he warned Binance staff that the road ahead is bumpy
Zhao did not downplay concerns, but there are still issues. According to Zhao, the young billionaire said that FTX’s problems had put Binance under “a lot of extra scrutiny” and asked tough questions. weather a confidence crisis.
“While we expect the next several months to be bumpy, we will get past this challenging period — and we’ll be stronger for having been through it,” he said in a memo viewed by Bloomberg.
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