Binance attempts to replace FTX efforts to deal with crypto regulation

Binance CEO Changpeng Zhao holds an eagle statue in front of the Binance logo with the message "butterfly player"

Binance CEO Changpeng Zhao has repeatedly spread the message that both his exchange and his company are financially stable, but critics point out that the company is too opaque to get a good picture of its finances.
Photo: Marco Rosi – SS Lazio (Getty Images)

Binance and its executives have regularly said they won’t follow in the footsteps of Sam Bankman-Fried’s fraudulent crypto empire, but they certainly pull games straight from the failing crypto founder’s playbook.

Tuesday, Binance announcement he was connecting with the Chamber of Digital Commerce, itself a crypto trade association, to assist in “discussions with policymakers and regulators” to develop regulations for the blockchain industry.

“Such work is fundamental to our shared mission to foster the sustainable development of sensitive cryptocurrency and blockchain regulations that ultimately ensure user protection,” Binance’s VP said.audience AAffairs Joanne Kubba said in the statement.

If this is starting to look like deja vu, it’s because before it implodes, declares bankruptcy and several fraud investigations have been launched against its leaders, FTX was also one of the main voices of blockchain regulation. FTX Founder and CEO Sam Bankman-Fried, soon to be coreturn to the United States to deal with federal royalties of fraud and violation of campaign finance laws, had made generous donations to members of both parties. Before the roof fell on his head, Bankman-Fried was pushing for a bill led by Senators Debbie Stabenow and John Boozman this would give more regulatory power to the Commodity Futures Trading Commission.

The Chamber also manages a political action committee who has spent just over $15,500 as of Nov. 28. That’s a pittance compared to what Bankman-Fried was publishing, but it’s a step towards even more crypto money falling into the hands of politico.

Binance and Zhao, which often goes through CZ, have makes statements on the need to some crypto regulation, though its new push to get straight into regulatory proceedings coincides with other news that makes Binance look like it wants to fill FTX’s decrepit shoes. Bankrupt crypto firm Voyager on Monday announcement it planned to sell its remaining assets, AKA old client accounts, valued at just over $1 billion to Binance.US, the company’s US arm. Traveler declared bankruptcy earlier this year, and Brian Shroder, CEO of Binance.US, wrote “Our goal is simple: get users back their cryptocurrency in the fastest possible time.”

However, Forbes noted that only about $20 million of the buyout would go to the bankruptcy estate. It’s a very similar deal that the US subsidiary of FTX struck with Voyager earlier this year, where the now-dead exchange pledged $50 million in exchange for $1.422 billion in crypto.

The total amount Binance is willing to pay is significant, especially considering CNBC asked Binance CEO Changpeng Zhao if his exchange could take a $2.1 billion hit if those handling from the bankruptcy of FTX were trying to recover an early investment, Zhao only repeated “we are financially strong.” The company that had conducted a selective “proof of reserves” audit for Binance pulled out of any crypto-focused audits after being criticized for how little those reports actually showed of the financial condition of various crypto firms. CZ said on Monday his business was “consistently profitable.”

The Crypto brothers retweeted by Zhao attempted to claim that “comparing Binance to FTX is ridiculouswhile citing Binance’s caveats. The problem is that Binance has resisted doing a full audit of its company like its rival Coinbase, which would look at other liabilities rather than just analyzing whether Binance has a full piggy bank. Editorial published by CoinDesk noted how Zhao’s responses did little to allay concerns about the company.

The opacity of the company was noted in a great Reuters report Monday. Binance does not list an official headquarters, which means it rarely, if ever, discloses financial information that other public companies regularly do, such as its liabilities, costs, and revenues. Although Binance is a private company, the Reuters report noted that it had analyzed deposits in the 14 jurisdictions where the company claims to be registered, and noted that there was “little information” indicating how the company is doing well. The company has made it clear that most of its revenue comes from transaction fees, and Zhao himself has claimed that they have no venture capital investments and don’t owe “anyone money.”

That’s not to say that FTX’s claimed “transparency” did anything to prevent the exchange from funneling billions of dollars in user crypto to hedge fund Alameda Research, leading to all these federal charges. However, Binance is currently under federal investigation for money laundering and violation of sanctions. So, in this way, the two exchanges can have a lot in common.


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