Binance Mingled Customer Funds with Company Account

According to an inside source familiar with Binance's finances, the cryptocurrency exchange allegedly mixed its revenue with customer funds at a U.S. bank between 2020 and 2021, involving billions. It was reported that this commingling of funds frequently occurred in Binance accounts held at Silvergate Bank. While no evidence of stolen or lost client funds was found, this practice breaches the U.S. financial regulations that mandate the separation of customer money and business revenue.

Binance spokesperson Brad Jaffe denied the commingling allegations, stating that the accounts in question were used solely to facilitate user purchases of cryptocurrencies, not to accept user deposits. Jaffe clarified that the funds were corporate and not commingled with customer funds. However, Binance's website reportedly referred to customer dollar transfers as “deposits”. It stated that these deposits could be withdrawn as USD, creating the default assumption that client funds would be safeguarded like traditional cash deposits.

In a previous report, Reuters revealed that Binance had undisclosed access to a bank account held by its U.S. arm, Binance. U.S. Through this account, Binance CEO Changpeng Zhao transferred over $400 million to a trading firm named Merit Peak Limited. While Reuters couldn't independently confirm all the figures provided by the inside source, it obtained a bank record showing that Binance mingled $20 million from a corporate account with $15 million from an account dedicated to receiving customers' funds. However, there was no evidence of customer funds being lost due to this commingling.

Binance's spokesperson responded to the allegations, rejecting the findings and reaffirming that the accounts in question were not used to receive user deposits but to assist users' purchases. The spokesperson maintained that the funds were strictly corporate and denied any commingling. In response to the report, Binance's Chief Communication Officer, Patrick Hillmann, criticized Reuters on Twitter, calling the story “weak” and accusing the news agency of lacking evidence.

This latest report by Reuters comes shortly after the U.S. Commodity and Futures Trading Commission (CFTC) charged Binance with operating an illegal digital assets exchange in the U.S. The CFTC also accused CEO Changpeng Zhao of running Binance through opaque entities. Binance is already facing regulatory issues in the U.S., with previous accusations of commingling funds. Additionally, the company is being investigated by the US Justice Department for possible sanctions violations and has recently announced its exit from the Canadian market due to stricter cryptocurrency regulations. The case of Binance mixing customer and company funds parallels similar allegations made against FTX founder Sam Bankman-Fried, who has denied knowingly commingling funds and is currently facing fraud charges.