According to a widely circulated article quoting numerous insiders, Binance mixed consumer assets with business funds at Silvergate Bank.
One of the biggest cryptocurrency exchanges, Binance, has refuted claims that it mismanaged users’ money. The rejection follows a Reuters article that suggested Binance may have violated U.S. banking laws by combining consumer payments with business earnings.
Allegations of Violating U.S. Banking Regulations
The comingling of funds reportedly took place daily, mostly on accounts held at the now-defunct Silvergate Bank, according to the Reuters story. According to the research, this practice cost billions of dollars in 2020 and 2021.
According to the report, Binance customers’ funds were transferred into a Silvergate account held by Key Vision Development, a business that Changpeng Zhao, the CEO of Binance, owns. According to reports, Binance told Silvergate that the Key Vision account was created to receive customer contributions not denominated in US dollars.
Claims of Fund Conversion and Account Usage
Another Silvergate-based account connected to the Cayman firm of the CEO of Binance, according to the investigation, was used to convert funds into the Binance USD currency. Reuters did not discover any proof that Binance client assets were stolen or lost, though.
Binance continues to hold the position that it has done nothing illegal and will respond to the accusations in that manner.
The Binance executive clarified that Reuter’s entire assertion is based on user deposit-based USD minting, where consumers were buying a stablecoin that was openly declared on the page to be redeemed by Paxos.