The cryptocurrency exchange Binance denies allegations of mismanagement of consumer funds. Binance’s denial was in response to a Reuters article that claimed the business had commingled customer funds and company revenue.
As reported by Reuters, Binance was accused of violating U.S. banking regulations requiring the segregation of client funds. According to the report, in 2020 and 2021, the exchange regularly commingled its corporate revenue with customer funds, with this practice occurring daily.
Citing information from three insiders with knowledge of the exchange’s financials, Reuters alleged that most of the commingling occurred in accounts held at the insolvent Silvergate Bank, with the total amount reaching billions of dollars.
The report also claimed that user funds were transferred to the Silvergate account of Key Vision Development, a Seychelles-based corporation owned by Changpeng Zhao, the CEO of Binance. Binance allegedly informed Silvergate that the primary purpose of the Key Vision account was to collect dollars from non-US clients.
Let me explain just how desperate a journalist @Reuters is to publish a negative story. The whole base of their story this morning, is that when users purchased BUSD (Paxos) from Binance, they were taken to a transaction page that had the term “deposit” on it. Users were making a…
— Patrick Hillmann (@PRHillmann) May 23, 2023
The Binance executive clarified that Reuter’s entire claim is predicated on user-deposit-based USD minting, in which users purchased a stablecoin redeemable by Paxos, as stated explicitly on the page.
Austin Federa, the head of strategy at Solana, questioned why Hillmann did not expressly refute claims of fund-comingling. A Binance executive stated that the exchange had addressed this issue multiple times.
“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,” Hillmann added.
Within months of the Commodity Futures Trading Commission’s lawsuit against the exchange, a slew of allegations alleging violations of U.S. banking laws have been made against Binance.