More trouble in the crypto world. After FTX, the second stock exchange in the world, collapsed and the entrepreneur behind it, Sam Bankman Fried, was arrested on suspicion of fraud, the world’s leading stock exchange – Binance, came under an execution attack. The distrust created by the arrest and the heavy suspicions following the many question marks regarding the collapse of FTX, led many investors to sell their digital currencies and meet with cash. In the last day, coins worth 2 billion dollars were redeemed.
Binance is having trouble digesting sales in such amounts and during the day it announced that it is temporarily halting withdrawals of the USDC currency due to volatile trading and technical problems arising from currency exchange and the fact that the requested withdrawals were from US banks that have not yet opened. Binance can handle withdrawals of $2 billion, but If this continues, there will be a problem. At the same time as these withdrawals, she needs to generate a high level of liquidity and no one really knows what her financial situation is.
Binance has been strengthened by the collapse of FTX, and it and its managers broadcast good business and eliminate doubts about financial-flow problems. The company tweets alleged documents that prove the level of its liquid balances and the stability of the balance sheet. But, the question is to what extent these data tell the story and provide a complete picture. To know the financial situation of the stock exchange, you need to get its full reports.
According to its managers, Binance holds bitcoin at a value higher than the value of customer deposits, so they apparently have nothing to fear. Meanwhile, the withdrawals in the last day join the withdrawals in the preceding days so that in total they were withdrawn in seven days – 3.7 billion dollars. At the same time, Binance’s own currency BNB also fell by 7%,
Binance management responded to the American media – “People withdraw and deposit funds from our platform every day due to a variety of reasons and considerations. Binance users’ assets are backed at a 1:1 level, and the company’s capital structure is not based on debt. We always have more
Money from what is needed to fulfill the requests for withdrawals.”
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Stopping withdrawals in a certain currency is definitely not a good sign. Let’s recall that this happened to the Celsius company, which collapsed for a short period of time after it stopped withdrawals and claimed that it was a one-off problem. One way or another, the amount of assets of Binance users is estimated to reach 60 billion dollars. Withdrawals of 2 billion dollars a day are very significant, and it seems that the coming days will be an important test for the company and its management.
Trust is the foundation of crypto trading
Crypto is based on trust between users, trust that this ‘corrupt’ financial system that is ‘controlled by the states and capitalists’ can be replaced by “the people” or “the common people”. It’s a nice belief, but the existing systems are not as rotten as the crypto advocates try to make them out to be. The truth is that they are much better and more reliable than supposedly completely decentralized systems like crypto – when in the world of digital currencies you don’t really know who is against you on the other side.
The world of crypto is young and there are already countless frauds, thefts, hacking into users’ systems, hacking and phishing or even just the simple danger of losing the password to your crypto ‘wallet’. And then – the money went. In the real world you have a ‘father and mother’, you have a landlord, you have someone to turn to if there is a problem with money. In the crypto world – no.
Binance managers are suspected of criminal offenses
The problems at Binance did worsen with the withdrawals, but they surfaced last week. At the time, Binance and its executives, including CEO Changfeng Zhao, were suspected of non-compliance with US money laundering laws and sanctions. It turns out that the investigation began as early as 2018 and at least half of the federal prosecutors involved in the case believe the evidence already gathered warrants criminal charges against individual executives, including founder Changfeng Zhao. “As has been widely reported, regulators are conducting a sweeping review of every crypto company,” Binance said, “The nascent industry is growing and we are required to secure and comply with large investments in our staff, as well as the tools and technology we use to identify and deter illegal activity.”
The investigation involves prosecutors from three Department of Justice departments: the Money Laundering and Asset Recovery Section, known as MLARS, the U.S. Attorney’s Office for the Western District of Washington in Seattle and the National Cryptocurrency Enforcement Team. Justice Department regulations say that charges of money laundering against a financial institution must be certified on by the head of the MLARS Senior officials from the other two ministries, along with higher-ranking Justice Department officials, would also have to sign off on any action against Binance.
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