Another member of the opaque crypto sphere investigated.
It is always dangerous to try to draw a parallel between competitors.
However, the lack of transparency of Binance is similar to FTX. It does not publish financial statements. A Reuters analysis of Binance’s corporate filings shows that the core of the business — the giant Binance.com exchange that has processed trades worth over $22 trillion this year — remains mostly hidden from public view.
It is incorporated in the Cayman Islands (not as nice as the Bahamas, but maybe less suspect) after leaving China where his founder, Changpeng Zhao, created it in 2017 in Shanghai. He did not like the Chinese regulators and moved the company to the Caribbean.
In March 2018, Binance announced its intentions to open an office in Malta after stricter regulations in Japan and China. In April 2018, Binance signed a memorandum of understanding with the government of Bermuda. Months later, a similar memorandum was signed with the Malta Stock Exchange to develop a platform for trading security tokens. In 2019, company announced Binance Jersey, an independent entity from its parent Binance.com exchange, with the aim to expand its European influence. Jersey based exchange offers fiat-to-cryptocurrency pairs, including the Euro and the British pound. Each and all of them are tax havens.
On 7 May 2019, Binance revealed that it had been the victim of a “large scale security breach” in which hackers had stolen 7,000 Bitcoin worth around $ 40 million at the time. It is under investigation for money laundering in the United States. Binance invested $ 500 million towards the acquisition of Twitter by Elon Musk that completed in October 2022. It even took a $ 200 million stake in Forbes.
Following the collapse of FTX, Paul MacIntosh, EY’s US financial services crypto co-leader, said on LinkedIn that “proof of reserves reports do not assess companies’ internal controls, which ultimately was the downfall of FTX. To move to true transparency and trust in the industry requires a much bigger step up,” he said, calling for the industry to invest in better accounting systems, IT controls and independent corporate governance.
And no, Binance is not too big to fail and should under no circumstances be bailed out by public money in any form. As to those who financed or invested equity, they are grown-ups and took their risks with open eyes. They had been warned and did not do their due diligence.
A French connection?
Binance is banned from most regulated countries and has not received any accreditation in those markets, while it might have registered — a simple administrative operation. It did however, ”announce that Binance France has been granted a Digital Asset Service Provider (DASP) registration by the Autorité des marchés financiers (AMF) with the approval of the Autorité de Contrôle Prudentiel et de Résolution (ACPR).” Its announcement was misleading. The accreditation has not even started. Binance recently launched a 100-million-euro ($113 million) initiative in France to develop its crypto and blockchain industry. So was the announcement of the same by Crypto.com who will build a $ 145 million headquarter in Paris.
It is consistent with the position paper of Paris-Europlace of March 2022. French and European financial industry has a major card to play in the use of Blockchain and digital assets. It can position itself favourably in a global race to digitisation, which has already begun. And thus maintain its autonomy and its driving role in financing of the economy and the development of a unified capital market.
Binance has hired Stéphanie Cabossioras from France’s Autorité des Marchés Financiers (AMF) in the latest example of a crypto exchange poaching staff from a financial regulator.
Does it have proven reserves?
Binance relied on the French audit firm Mazars to establish its level of proven reserves. That firm certified that the reserves were sufficient as of November 30, 2022. Immediately afterwards, it has suspended all work with its crypto clients, including Binance.
The crypto market has been tanking for a while and the Binance cryptos (BNB Coin) lost two-third of their value in one year. “We maintain hot wallet balances to ensure that we always have more than enough funds to fulfill withdrawal requests and we top up hot wallet balances accordingly,” the spokesperson said. Hot wallets are digital repositories for tokens that are connected to the internet. Are they their ownership or client money. Whose wallets are those?
The withdrawal of money by Binance clients has accelerated. The company explains (in its New Zealand site) how to withdraw.  Investors withdrew as much as $3 billion from Binance on Tuesday December 13, according to blockchain analytics firm Nansen, as a deluge of negative headlines about the cryptocurrency industry rattled users of the world’s largest exchange. Outflows from Binance accelerated to $ 6bn in the first half of that week, as the crypto exchange battles to avert a crisis of confidence.
Binance has said it holds more than $60bn in assets, enough to honour withdrawals. On the other side it disclosed holdings of 600,000 tokens that are worth $ 19 billion: is the gap client money? The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health. It is impossible that this does not include the assets in the Binance wallet belonging to clients. One of the key regulations should be to prohibit trading platform to act as depositories of their clients’ money. Changpeng Zhao Won’t Rescue Binance by Selling out Crypto Self-Custody.
Investors are worried that cracks are starting to appear at Binance after the shocking collapse of FTX. The crypto exchange giant faces questions about its reserves, and it is under investigation by the DOJ. As the crypto market lose confidence in the exchange, its CEO warned staff of “bumpy” times ahead. 
Today, it was announced that Binance will help Azerbaijan with crypto regulations. Binance has processed Iranian transactions with a value of $8 billion since 2018 despite U.S. sanctions intended to cut Iran off from the global financial system, blockchain data show. Binance refused to close the accounts of Russians as part of the Ukrainian War sanctions.
Binance announced that it is investigating a hacking incident that affected a number of crypto tokens. According to Changpeng Zhao, a private key, used to encrypt or decrypt data, had been hacked. Chief Strategy Officer Patrick Hillman said the exchange may become obsolete because of the crypto industry’s move toward decentralized finance.
Binance has sought to portray BNB and its associated blockchain as largely decentralized, and akin to Bitcoin or Ethereum. These claims have been greeted with skepticism, however, within the broader crypto community, particularly after a revealing incident: The Binance chain got hacked for $570 million in early October. In response to the hack, Binance quickly “paused” the chain’s activities — a feat that could not be easily undertaken on a decentralized blockchain.
It might not last a year …