After the FTX bankruptcy, Binance CEO Changpeng Zhao (CZ) reaffirmed his commitment to openness, but Reuters accused Binance of concealing its liabilities and financial facts this week.
Reuters even speculated (1) that, like BitMEX, FTX, and other companies sued by the CFTC, management at Binance might have a financial stake in market-makers who trade against the exchange's consumers (CFTC).
The media site claimed to have extensively researched regulatory filings worldwide, including contacting dozens of regulatory bodies for interviews.
Since leaving (2) China, Binance, and CZ have gained notoriety for their nomadic existence as they seek to evade governmental monitoring. And to this day, Binance still won't say where its offices are. We can only speculate because CZ recently purchased (3) an apartment in Dubai.
Binance does not disclose its revenue, expenses, or cash on hand; it also does not reveal the volume of margin trading on its platform or the total supply of its BNB cryptocurrency. Still, it brags that it handled over $22 trillion in transactions last year.
Based on an examination of data from CryptoCompare conducted by Reuters, it is estimated that Binance made over $4.6 billion in fees from spot trading and another $6.4 billion from its derivative trading platforms in total in 2018.
However, without Binance's full financial disclosure, those numbers will remain approximations at best. Transparent transparency is not occurring despite CZ's assertions.
Binance has a checkered past with media reports detailing sloppy know-your-customer (KYC) & anti-money-laundering (AML) measures, and CZ has a reputation for ignoring regulations. Reuters has previously stated (4) that Binance established Binance.US to penetrate the US market, avoiding subjecting Binance.com to domestic investigation. Reuters further claims that the market facilitates money laundering and sanctions evasion.
If this is the case, Binance's strategy of opening "country-specific" offshoot exchanges isn't always successful. Binance is under investigation for laundering money and regulatory violations by US authorities. Binance's strategy to evade oversight was detailed in leaked Tai Chi documents, which Forbes reported on. Binance has disputed this rumor emphatically.
Binance's chief strategy officer Patrick Hillmann refuted Reuters' claims that the company was being purposefully vague. Companies that are privately held are not required to reveal as much financial data to regulators as publicly traded companies. Hillman claims that Binance always provides regulators with the data they want.
He said that the disclosure process to regulators in such markets could take up to six months because of the "incredible number of corporate and financial information" that must be given.
Hillman drew parallels between Binance and privately held corporations like confectionery manufacturer Mars, but a spokeswoman for Mars called the comparison "absurd."
Hillman asserts that if a customer loses a wager on Binance's derivative trading platform, Binance will fully reimburse their money and close off their positions. To protect users' leveraged holdings from going negative due to excessive market volatility, he added, Binance offers insurance. Hillman stated that these liquidation & risk mitigation procedures were part of Binance's conservative approach to business.
Binance is Co-operating with Law Enforcement
In a recent blog post (5), Tigran Gambaryan, Binance's global head of intelligence and investigations, stated that the company was doing more to help authorities. According to Gambaryan, Binance has raised the staff of its compliance and security division by 500% since November 2020 and has answered 47,000 inquiries from law enforcement in that time.
Reports (6) by Reuters in June 2022 that the Binance exchange facilitates financial fraud for cybercriminals, drug smugglers, and Ponzi rings were refuted in a blog post co-written by Ganbaryan.
Binance has stated that it is powerless to prevent monies from being sent to one of its deposit addresses by a malicious third party. However, if they find that a transaction has violated the law, the cash involved can be frozen. Then, it collaborates with law enforcement to find a solution.