Binance Commingled User Funds Daily In Silvergate Bank Accounts: Reuters
The commingling of funds happened almost daily in accounts held at US-based crypto-friendly bank Silvergate Bank. The sums of funds ran into billions of dollars, as per an insider with direct knowledge of Binance’s group finances.
Binance failed to comply with U.S. financial rules that require keeping customer money separate from the company’s accounts. There’s a lack of internal controls to differentiate customer funds from company revenues.
Reuters didn’t verify exact figures or frequency. However, it reviewed a bank record dated February 10, 2021, showing Binance mixed $20 million in corporate funds with $15 million from an account that received customer money.
John Reed Stark, a former chief of the Securities and Exchange Commission’s Office of Internet Enforcement, said “Binance customers shouldn’t need a forensic accountant to find where their money is.”
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Must ReadBinance Under Regulatory Scrutiny in the US
Binance has been under heightened regulatory scrutiny from regulators in the US. In March, US CFTC sued Binance and CEO Changpeng “CZ” Zhao for violating commodities laws and operating an illegal derivatives exchange. The DOJ is also probing Binance for several matters, including violating sanctions against Russia.
SEC Chair Gary Gensler earlier said many crypto exchanges are not complying with laws requiring registered broker-dealers to separate client money from corporate assets. The SEC has brought enforcement actions against many crypto firms and exchanges but didn’t come with any action against Binance. Gensler revealed that “Their business models tend to be built on taking customer funds, commingling it.”
CoingGape Media reported that SEC is close to bringing an enforcement action against Binance. However, it’s unclear whether Binance or Binance.US is in the SEC’s crosshair.