If you’ve been following the world of crypto, you’ve probably seen one company popping up in the headlines a lot recently, and not for the right reasons. There’s been a lot of buzz lately about Binance and it seems like everything is definitely not alright.
Things really started to unravel for Binance right around the time that the whole FTX scandal went down and infamous CEO Sam Bankman-Fried was getting fitted for his orange jumpsuit. That whole situation has led to demands for increased transparency across the entire crypto industry and it seems as if Binance definitely has some skeletons in its closet.
To make matters worse, Binance’s CEO, a guy known as “CZ” who I’m pretty suspicious is a robot, went on CNBC’s Squawk Box and gave probably the most worrisome interview of all time.
So, if you’re currently investing in crypto through Binance, you might want to jump off this sinking ship because things aren’t looking so great.
There’s been a lot of skepticism surrounding Binance for a long time. The company’s CEO, who we’ll just call CZ because I’m not going to write out his full name, is a slightly suspicious character. He’s been known to hide out in Dubai (where he can’t be prosecuted by the U.S.), there are questions about how many employees actually work at Binance compared to what it says in their books, and CZ never sets foot on U.S. soil, presumably, because he’s afraid of being arrested over here.
So, when shit started to hit the fan with FTX, the crypto industry as a whole came under scrutiny and, naturally, CZ and Binance were put under the microscope. Things came to a boil when SBF was finally charged by the SEC, CFTC, and Department of Justice.
This caused a massive sell-off of BNB, Binance’s native token. Over $1 billion was pulled out of the cryptocurrency in a single day. That represented a 5.5% drop in the price of the cryptocurrency and raised some red flags about what’s really going on with Binance.
Now, in this case, there were no problems with the withdrawals. Binance weathered the storm and made all the payouts. And, indeed, they claim that they keep $55 billion dollars in-chain, meaning that if everyone withdrew every cent they had in BNB right now, Binance would be able to give everyone their money.
But, since the whole FTX scandal (again, in which they were loaning out investor funds and not keeping that money in-chain), people have their doubts about whether Binance actually has that $55 billion ready to go. And there have been some red flags that indicate the answer may be no.
Red Flag #1
CEO of Binance CZ went on a CNBC program called Squawk Box and he was asked directly about some of these concerns. And his answers were anything but reassuring. At first, CZ made sure he told everyone that Binance holds every dollar invested through the platform in cold storage, one-to-one.
However, when he was asked about a very real recent liquidity issue that they had concerning withdrawals of USDC, he didn’t have any real answers. CZ continued to have a very non-committal attitude for the rest of the interview. When asked whether they would be able to make a $2 billion payout if need be, he wasn’t able to give a firm yes.
When asked if Binance had used customer funds for investments, he also didn’t give a firm yes. And, I’m not going to make any assumptions but, if they aren’t investing user funds, how did Binance make a $500 million dollar investment in Twitter? Where did that cash come from?
So, all of that just seems really shady to me. And, apparently, I’m not the only one who thought so. In fact, Binance’s accounting firm dropped them as a client, presumably, so they could avoid a legal shitstorm if it comes to that for Binance.
Red Flag #2
So, unless you’re ridiculously deep into the world of finance, you’ve probably never heard of the firm Mazars. They’re a French accounting firm that’s worked with some major players in the crypto space like Crypto.com, KuCoin, and, of course, Binance. Specifically, Mazars is responsible for coming up with proof of reserve reports for these companies. And that service has come in high demand after the whole fiasco with FTX.
Essentially, Mazars is there to prove that Binance and those other crypto exchanges actually have the amounts of reserves on hand that they claim they have. And, well, they just dropped Binance as a client, which looks really bad.
Think about it: if Binance did have the reserves that they’ve claimed they have, Mazars should have no trouble legally and ethically doing their job and coming up with a proof of reserve report. However, the fact that they chose to refuse this business suggests that Mazars thinks it could face legal repercussions if it serves these crypto companies as clients.
This is all really concerning for crypto investors right now, and allow me to explain what may be going on here and why you should care.
Why You Should Care
So, most of these companies (including Binance) are claiming that they have no liabilities. And, in fact, if we look at their audits, they’ll show that they actually don’t have any liabilities. Well, since Mazars refuses to work with these companies, we can kind of assume that there’s something shady going on.
And it’s very possible that Binance and other companies are using funds from investors to fulfill their liabilities, allowing them to claim zero liabilities on the books and essentially shifting the liabilities to investors.
First of all, they can’t do that legally. Second of all, that means that if Binance should suddenly crash and everyone started withdrawing their money, Binance wouldn’t have the money to pay everyone out. And that’s majorly concerning.
Essentially, this is the same situation that just went down with FTX. And it seems very possible that the same shady practices are going on in other places in the industry. Now, I’m certainly not saying that Binance is doing this for sure. However, it’s this concern that’s the reason Binance’s name is all over the news right now and it’s why people can’t wait to get their money out of BNB and the Binance exchange.
There are a whole lot of red flags going up with Binance right now. And, personally, I’d recommend moving your money to another exchange and liquidating any money you have in BNB right now. You don’t want to wait to liquidate it until it’s too late.
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