For the past several days, Binance has been trying to restore investor confidence following a sharp drop in its native Binance Coin (BNB) token. In addition, the world’s largest crypto-currency exchange is also trying to pull itself out of the rubble caused by massive customer withdrawals in recent days.
Binance’s current predicament is a reminder of the turn of events that sank FTX. Moreover, amidst Binance’s difficulties, a recent Reuters article examined the company’s financial and operational affairs with questionable intent. Basing its coverage of the Binance situation on filings, the Reuters article describes the company’s books as a “black box“.
The Reuters article, which takes a perceptibly aggressive stance, recaps Binance’s massive net outflow of $6 billion over 3 days last week. At the time, the leading crypto-currency exchange reportedly handled the massive transaction without a hitch and pledged to embrace transparency after the FTX collapse. However, the Reuters article also reports that Binance’s recent filings discredit the company’s promise of transparency. According to the report, the Changpeng Zhao-led exchange has processed more than $22 trillion in trades this year. Moreover, these transactions remain mostly hidden from the public.
Binance’s books criticized for alleged opacity
In addition, other criticisms of Binance included the company’s failure to disclose the physical location of Binance.com and basic financial information. The author of the report in question also claimed that Binance does not disclose the role its BNB play in its balance sheet. In addition, while the exchange facilitates customer loans against their crypto assets and allows margin trading, it is not transparent about the receipt of these activities. This includes disclosing the size of bets, Binance’s exposure to these risks or the adequacy of reserves to fund withdrawals.
However, Binance has no obligation to publish detailed financial reports, as it is not a public company like its US rival Coinbase. In addition, because Binance has reportedly not generated outside capital in four years, it has not had to share financial information with outside investors.
In any event, Reuters claims that Binance remains intentionally shrouded in secrecy, particularly to avoid scrutiny from U.S. regulators. Changpeng Zhao has actively sought to conceal the company’s core U.S. business by creating a new U.S. exchange. Although the CEO denied the allegations, Reuters cited company messages and interviews with numerous former Binance associates as evidence. Commenting on Binance’s approach to its financial situation, John Reed Stark, former head of the SEC’s Office of Internet Enforcement, said:
“They co-opt regulatory nomenclature to create a veneer of legitimacy. There is absolutely no transparency, no light, no confirmation of any kind about its financial condition.”
Amidst the implied insincerity of Binance’s financial books and its facade “black“, the Reuters report also states that the company is under investigation. The U.S. Department of Justice is investigating the leading crypto-currency exchange for money laundering and sanctions violations. The report also said that some prosecutors already have plenty of evidence to indict Binance and its top executives.