The crypto exchange denies violating U.S. banking rules by combining customer deposits and company revenue, as alleged by a Reuters report.
According to a Reuters report, citing three former insiders in 2020 and 2021, Binance commingled customer funds with company revenue in violation of U.S. financial rules that require customer funds to be kept separate.
The report alleged that the exchange used accounts at Silvergate Bank. This U.S. lender collapsed in March to transfer large sums of money from its purportedly independent U.S. partner, BAM Trading, to Merit Peak Ltd., a trading firm managed by Binance CEO Changpeng Zhao.
The report also claimed that Binance allowed U.S. customers to trade on its platform despite publicly declaring to restrict access to Americans and that Binance.US executives were unaware of the transfers.
Binance’s Response to allegations made
In Response to the allegations, Binance denied mixing customer deposits and company funds, stating that the accounts were used to facilitate user purchases of its dollar-linked crypto-token, Binance USD (BUSD), redeemable by Paxos, a regulated trust company.
Binance also said that Merit Peak is neither trading nor providing services on the Binance.US platform and that only Binance.US employees can access the U.S. company’s bank accounts.
Binance’s chief of communication, Patrick Hillmann, called the Reuters report “1000 words of conspiracy theories” and said that the exchange maintains separate ledgers for user and corporate funds.
Concerned about money trafficking, terrorist financing, and investor protection, U.S. authorities are increasing their oversight and regulation of cryptocurrency exchanges.
The SEC has launched a crackdown on several crypto firms this year but has not targeted Binance with any direct enforcement action. In March, the CFTC lodged a complaint against Binance, alleging that it offered illegal derivatives trading to U.S. clients.
The crypto exchange is also facing regulatory challenges in other countries, such as the UK, Germany, Japan, and Singapore, where it has been accused of operating without proper licenses or authorizations.
Binance is the world’s largest crypto exchange by trading volume, with over $100 billion in daily transactions. It offers hundreds of cryptocurrencies and derivative products to users across the globe.
