Binance's Billion-Dollar Blunder? Report Says Crypto Exchange Commingled Funds

The world's largest cryptocurrency exchange Binance allegedly violated U.S. financial rules by commingling customer funds with company revenue, in accounts held at U.S. lender Silvergate Bank SI, with sums running into billions of dollars.

A Tuesday Reuters report quoting unnamed sources stated that a bank record reviewed by the news agency showed an instance of $20 million from a corporate account being mixed with $15 million from an account that received customer money on Feb. 10, 2021.

A Binance spokesman denied commingling funds in a statement shared with Reuters.
“There was no commingling at any time because these are 100% corporate funds,” said Binance spokesman Brad Jaffe, according to Reuters. 

Benzinga has contacted Binance for comment on the report. 

The alleged commingling of funds at Binance raises concerns about a lack of internal controls and the potential risk to customer assets.

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Speaking with Reuters, three former U.S. regulators emphasized the importance of segregating customer funds from company revenues, stating the commingling obscured the whereabouts of client assets.

John Reed Stark, a former chief of the Securities and Exchange Commission's Office of Internet Enforcement, expressed the view that Binance customers shouldn't "need a forensic accountant to find where their money is."

While there is no evidence that Binance client funds were lost or taken, SEC Chair Gary Gensler has criticized crypto exchanges for not complying with regulations that require separating client money from corporate assets.

He stated that many crypto exchanges' business models involve commingling customer funds.

The SEC has not taken direct enforcement action against Binance.

Binance has faced previous allegations, including allegations by the U.S. Commodity Futures Trading Commission (CFTC) that it allowed U.S. customers to trade on its platform despite publicly claiming to restrict access to Americans.

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