Even by the extreme standards of cryptocurrency trading, the past few weeks have been tumultuous for the world’s largest cryptocurrency exchange, Binance.
Confidence in the entire sector collapsed last month after rival FTX collapsed over fraud and criminal allegations.
Customers withdrew over $3 billion in one day from Binance last week as part of a frenzy that saw over $6 billion withdrawn in three days.
On Friday, accounting firm Mothers, which promised to provide a “proof of reserves” report by Binance, ended work with all crypto firms due to a “public misunderstanding” about what they were offering. It stopped suddenly.
The ‘Certificate of Reserves’ report is not a full audit and does not provide information on liabilities.
According to media reports, US prosecutors are still considering money laundering and sanctions violation charges against the company and possibly its co-founder and CEO Changpeng Zhao. The company declined to comment on the investigation.
The stakes weren’t high.
“It is absolutely essential that Binance survives,” said Dan Ashmore, an analyst at crypto investment firm Invezz.
“A demise of any kind would be a devastating blow to cryptocurrencies and could bring down much of the industry.”
For Starkiller Capital’s Leigh Drogen, if Binance collapses, it will be a near-term crypto price ‘Armageddon’.
– Investors ‘Confused and Scared’ –
Mr. Cho’s public appearances do little to ease tensions.
In a recent interview with CNBC, he claimed the company “kind of forgot” about some of the $2.1 billion payments Binance received from FTX last year.
Zhao said a “huge chunk” of FTX’s now worthless internal token was paid, but left for 18 months before Binance remembered and transferred the amount.
In an opinion piece for crypto news outlet Coindesk, Grit Capital’s Genevieve Lochdecter said, “Forgetting over $500 million gives Binance confidence in its ability to properly run its exchange. You should be able to have it,” he wrote.
Critics have noted Zhao’s tendency to make confusing and sometimes contradictory public statements.
Although he claims he wants transparency, Binance does not want to disclose even basic company information such as its registration location, let alone undergo a full audit like any public company must. is refusing.
Zhao has sympathy for regulators in some jurisdictions, but his main business is reportedly keeping it out of prying eyes in the Cayman Islands.
While he emphasizes the solidity and competence of his company, his personal Twitter feed paints an image of a one-man band backed by interns.
“Who runs the show there? Is it the same as FTX?” Drogen asked.
He said Cho’s behavior “eerily resembles” FTX boss Sam Bankman Freed, who is currently in custody awaiting extradition to the United States on financial crime charges.
“Everyone is very confused and afraid about it,” Drogen said.
When asked to provide details of Binance’s structure, a company spokesperson said in an email, “Binance.com’s global business operates through a number of entities embedded in various jurisdictions. There are,’ he said.
On the issue of transparency, he said the blockchain technology that cryptocurrencies rely on is “intrinsically transparent.”
“That said, we are open to additional transparency and are looking at how best to provide this in the coming months.
– “Too big to crush”? –
Analysts agree that comparisons with FTX can only go so far.
Charlie Erith of ByteTree Asset Management said, “While there are obvious similarities to FTX, there are important differences. Most notably, Binance does not have a large in-house hedge fund.
Many of the alleged fraudulent activities at FTX involved Bankman-Fried using FTX customer deposits to fund risky bets made by hedge fund Alameda Research.
“I don’t think anyone, even those who are assuming the worst, thinks that Binance is even half insolvent,” Drogen said.
Binance is about 10 times the size of pre-collapse FTX in terms of assets that should be on the platform, providing a much larger cushion in case withdrawals suddenly spike, he notes. Did.
A Binance spokesperson said the company processed last week’s withdrawal requests “without losing momentum,” adding that “flow has normalized.”
Drogen emphasized that hedge funds and venture capitalists exposed to crypto assets need the Binance platform now to protect their positions.
However, the company’s long-term prospects are less clear, especially if US authorities pursue criminal charges.
“We feel that there is nothing in crypto that is too big for the U.S. government to fail,” Drogen said. “They will probably crush what is illegal on some level.” rice field.
jxb-dho/rl/mca
