Binance experienced $ 1.4 billion Bitcoin exit last week. This is one of the reasons the company has been in the spotlight following the FTX bankruptcy. Investors are now worried that cracks are starting to appear in Binance. Here are 5 things to know about what’s going on.
Binance under scrutiny after FTX bankruptcy: Here are 5 things you need to know
People are concerned that Binance is holding its customers’ funds
After FTX’s bankruptcy showed that their coffers were empty, crypto firms came under pressure to show that their customer donuts were safe and would be able to pay if there was a rush to withdraw. On top of that, Reuters reported that Bankman-Fried silently transferred at least $4 billion in user funds to its subsidiary, Alameda Research, after suffering losses.
Amid these developments, Binance sought to boost confidence in its industry with its “proof of reserve” system. He went under the scrutiny of accounting firm Mazars to confirm to clients that their money was still in their accounts. But legal experts find the Mazars reports inconclusive, as they haven’t examined how good financial controls are. While suggesting that Binance’s standing is solid, it also showed that Bitcoin liabilities are $245 million greater than assets, WSJ reported.
According to Bloomberg, about half of the exchange’s $75 billion reserves are in its own tokens. These funds are held as BNB and BUSD. Meanwhile, accounting firm Mazars suspended its proof-of-reservation work with Binance and other exchanges on Friday “due to concerns about the way these reports will be understood by the public.”
Clients withdrew net $3 billion in funds in one day
Binance has witnessed heavy withdrawals in recent days as questions have been raised about its reserves and a DOJ investigation. Meanwhile, the arrest of FTX founder Bankman-Fried has further eroded trust in crypto. On Tuesday, Binance recorded the highest daily withdrawal since June, with a net outflow of $3 billion in just 24 hours, according to Nansen data. The exchange had to temporarily freeze withdrawals of USD Coins while increasing its stablecoin holdings.
A little over a month ago, the crypto giant held $69.5 billion in cryptocurrencies in public wallets, according to Nansen. Due to large withdrawals and price fluctuations, the total is now stated to be $54.7 billion. As Kriptokoin.com, we have included the details of the development in this article.
There is a DOJ investigation into Binance focused on money laundering
The US Department of Justice is reportedly investigating Binance over the company’s compliance with financial crime rules. According to Reuters, prosecutors are considering whether to file criminal charges against founder CZ and other executives. These include money laundering conspiracy, unlicensed money transfer and criminal sanctions violations. Reuters suggests that Binance processed over $10 billion in illegal payments in 2022. He also said that the crypto giant is trying to evade the regulators it has objected to.
Binance CEO says things are as usual
Changpeng Zhao doubled down on business by trying to alleviate clients’ concerns about Binance’s liquidity. “People can withdraw 100% of their holdings on Binance,” he told CNBC on Thursday. We won’t have a problem any day. “Crypto businesses need to keep user assets one-to-one, and that’s what we do.”
Earlier in the week, Zhao didn’t mind the massive outflows in the stock market, saying “business as usual”. After Binance lifted its freeze on USDC withdrawals, it welcomed the events as a credibility-boosting “stress test” for the exchange’s resilience.
But he warned Binance staff that it’s a “bumpy” road
While Zhao downplays the concerns, the problems persist. The young billionaire told his employees that FTX’s problems brought “a lot of extra scrutiny and hard questions” to Binance, which had to get through a crisis of trust. In a note viewed by Bloomberg, “We expect the next few months to be bumpy. We will get through this difficult period. We will be stronger as we get through this,” he said.