FTX was a devastating event to strike the crypto space, and now, regulators and people in charge of America’s financial sector are warning that something bad could potentially happen with Binance, which as we all know, had strict ties to FTX when the company fell into oblivion.
Binance Could Be in Hot Water
John Reed Stark – a former attorney for the Securities and Exchange Commission (SEC) – has warned in a recent interview that Binance could possibly see a heavy deposit run, which could wind up hurting investors like nothing ever has. He stated:
Binance is a shadow bank, minting their own counterfeit currency while providing limit-order books/ brokerage/ custody/ clearing/ settlement/ etc. with no U.S. regulatory oversight or audit. It’s FTX redux and an epic bank run seems inevitable.
The exchange has faced a lot of criticism and concerned eyes as of late given there are many traders and companies out there that question if the company can indeed deal with overwhelming withdrawals. During the time of the FTX collapse, Binance saw customers withdraw more than $8 billion in crypto funds, and the company experienced some strict rigidity following the transactions.
Stark said:
Once withdrawals are suspended and a collapse begins, not only will Binance’s customers be cut off, but the customers also likely become unsecured creditors.
Not long ago, an investigation by Forbes led reporters to believe that there was a hole in the company’s finances that came close to $2 billion, though its founder and CEO Changpeng Zhao said this was misconstrued information and he dismissed the details.
This wasn’t enough to convince lawmakers like Elizabeth Warren, the democrat senator from the state of Massachusetts. Warren said that the circumstances surrounding FTX were similar to the U.S. division of Binance, and she demanded that the company answer for the similarities. In a letter, she said:
Your companies’ apparent attempts at evading the enforcement of anti-money laundering laws, securities laws, information reporting requirements, and other financial regulations cast serious doubt on the stability and legitimacy of Binance and its related entities and on your commitment to your customers.
FTX – It Was REALLY Bad
FTX will likely go down as one of the biggest embarrassments to ever occur within the borders of the crypto arena. The company first arrived on the scene in 2019, and within three years, it was labeled one of the world’s largest and most popular digital currency exchanges. The man behind it – Sam Bankman-Fried – was lauded as a genius, and his net worth was in the billions prior to the company’s collapse.
Things got ugly in November of last year when SBF announced online that his company was suffering from a liquidity crunch and he needed fast cash. A buyout from Binance didn’t happen and the company was forced to enter bankruptcy proceedings.
