[HN Gopher] SEC Accuses Binance of Mishandling Funds and Lying t...
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SEC Accuses Binance of Mishandling Funds and Lying to Regulators
Author : pyrophane
Score : 169 points
Date : 2023-06-05 15:23 UTC (7 hours ago)
(HTM) web link (www.nytimes.com)
(TXT) w3m dump (www.nytimes.com)
| booleandilemma wrote:
| _" On the surface, we cannot be seen to have U.S. users but in
| reality, we should get them through other creative means," a
| Binance executive wrote in an internal message excerpted in the
| complaint._
|
| Nice.
| sdfghswe wrote:
| It's scumbags all the way down.
| fourseventy wrote:
| Web3 is going great
| guru4consulting wrote:
| just can't resist. here we go: https://web3isgoinggreat.com :)
| EdwardDiego wrote:
| This is good for Bitcoin. Few understand.
| gadnuk wrote:
| > In one instance, the Binance chief compliance officer messaged
| a colleague that, "[w]e are operating as a fking unlicensed
| securities exchange in the USA bro."
|
| Source:
| https://twitter.com/JohnReedStark/status/1665748594421297152
|
| Is there any player in this space that plays by the rules? CZ
| going the way of SBF. Tether next?
| llamataboot wrote:
| Tether /is/ the main (fraudulent) player
| onlyrealcuzzo wrote:
| Interesting that Tether and BitFinex have always been the
| worst and most corrupt, and are somehow last in line...
| anigbrowl wrote:
| This is such a great quote that the SEC made it up as a slide
| to accompany the announcement of the charges on Twitter. Many
| crypto enthusiasts considered the SEC's communication style
| most inappropriate XD
|
| https://twitter.com/SECGov/status/1665779371108335618
| ProjectArcturis wrote:
| If you played by the rules, you would have already lost out to
| the cheaters.
| wmf wrote:
| Yep, this is the story of Gemini.
| charcircuit wrote:
| >We allege that Zhao and the Binance entities not only knew the
| rules of the road, but they also consciously chose to evade them
| and put their customers and investors at risk
|
| What risk is being alleged? That people could trade things they
| wanted at a price they agreed to?
| JumpCrisscross wrote:
| > _What risk is being alleged?_
|
| Have we already forgotten FTX?
| seanhunter wrote:
| The allegation is that customer funds were inappropriately
| used/commingled by Binance entities, putting customers at risk
| of loss. That's the primary risk they're talking about.
|
| People getting scammed by inappropriate marketing of
| unregulated securities is a secondary risk.
|
| People losing money due to market abuse is a tertiary risk.
| charcircuit wrote:
| What's the risk of commingling? As long as the balances are
| recorded you can undo the commingling.
| johntiger1 wrote:
| Surprise, surprise. Won't be long til we see CZ go the way of SBF
| raverbashing wrote:
| Maybe he's slightly smarter than SBF and will self-retire to a
| non-extradition jurisdiction
| ipnon wrote:
| If he's already in China there is no risk of extradition for
| him.
| johntiger1 wrote:
| he's canadian iirc (i think the richest one right now,
| actually)
| graeme wrote:
| To be rich means you actually have fungible assets you
| can trade for things.
|
| I do not expect CZ could get anywhere near his reported
| $15 billion. I do not think he could get and keep more
| than one billion.
|
| SBF didn't that's for sure.
| raverbashing wrote:
| I certainly would be more than happy with $1Bi, heck even
| with 1/100 of that I'd be happy
| b0sk wrote:
| I wonder if SBF provided them some evidence/hints. CZ was one
| of the reasons that accelerated FTX's demise.
| JeremyNT wrote:
| Maybe not SBF specifically, because he seems to be too stupid
| to cut a deal, but the whole crypto space appears to be a den
| of thieves where secrets were poorly kept. I imagine that
| many players in his orbit knew at least generally what CZ and
| the other exchanges were up to.
|
| Now that the feds seem to be giving a hoot about these scams,
| they shouldn't have much trouble flipping people and rolling
| up the chains to the bosses on the other exchanges too.
| methodical wrote:
| Every time a crypto article is posted there are one of two people
| in the comments; those acknowledging yet another failure in a
| continuous display of cryptocurrency's blatant inability to be a
| valid currency, and those who mindlessly still think there's any
| hope for cryptocurrency to be a global currency.
|
| Those who say that CEXs aren't part of the core values of
| cryptocurrency are right, except also completely ignorant to the
| fact that without CEXs, crypto's usability as a currency is
| practically 0.
|
| CEXs have failed, hardware wallets have failed, soft wallets have
| failed, seed phrases are fundamentally problematic, etc.
|
| Cryptocurrency won't ever be functional on a large-scale as a
| global currency, and that much is evident. It's not even a matter
| of opinion; the core idea of decentralization which "makes crypto
| great" makes it unusable as a currency for the vast majority of
| people- who would need to rely on some centralized authority in
| order for crypto to operate within the real world.
|
| Anybody left in the space must just be hanging onto greater fool
| theory, that or has drank the kool-aid.
| scyclow wrote:
| You're building a straw man argument against the pro-crypto
| side though. Not everyone there is a crypto0libertarian
| anrarcho-capitalist.
|
| There are a lot of people who are optimistic about the
| technology who also welcome regulation on the CEX side. I feel
| like most people in the pro-crypto camp also acknowledge that
| several of the ancillary components that make up the crypto
| ecosystem (such as wallet technology) are really problematic
| from a UX standpoint -- but also that they are fixable.
|
| That said, the whole global-reserve currency thing might be les
| of a straw man, as it correctly describes the views of a lot of
| Bitcoin maxis (who are delusional IMO). But we're talking about
| a broad technology with other use cases, and isn't accurate for
| everyone.
| kkielhofner wrote:
| > but also that they are fixable
|
| Yet after 14 years they don't seem to ever actually get fixed
| - from just this week[0].
|
| The fundamentals of crypto - irreversible, be your own bank,
| no margin of error, medieval castle level security
| practices/requirements, etc go against fundamental human
| nature. We forget things. We make mistakes. We're not capable
| of securing financial resources against an entire internet
| full of marauding bandits.
|
| How many CC charges are disputed daily? How many password
| resets do you think Bank of America does daily? Answer is:
| staggering numbers. Post-FTX many "crypto users" (read: have
| an account on a CEX) actually interacted with blockchain for
| the first time and transferred crypto to a wallet. Ledger
| wallet sales exploded. It didn't take long for them to deal
| with such tremendous incoming of people losing access,
| forgetting seeds, etc to implement a backup mechanism. It
| didn't go well[1].
|
| [0] - https://www.bleepingcomputer.com/news/security/atomic-
| wallet...
|
| [1] - https://decrypt.co/140317/ledger-crypto-wallet-under-
| fire-ov...
| scyclow wrote:
| True, Bitcoin has been around for about 14 years, but we're
| only a couple years into the current wave of consumer
| hardware wallets. And from a smart contract standpoint
| we're still seeing innovative for different ways to control
| the flow of assets. I don't think that the future of
| blockchain transactions necessarily needs to involve
| consumers interacting with the technology on such a low
| level. It's seems like there's plenty of room to build
| abstractions on top of it... which I'm sure the purists
| wouldn't like. But ultimately, I'd give it a few years to
| see what happens before writing it off.
| kkielhofner wrote:
| I don't dismiss it completely - for example, I have many
| friends who fled countries who would've been happy to be
| able to leave with _something_ other than the clothes on
| their back. However, this is (fortunately) a very niche
| use case.
|
| 14 years is a very long time. I've been using Linux on
| the desktop since 1997. For probably 10 years there
| people were talking about it being "the year of the Linux
| desktop". 25 years later the Linux desktop has roughly 3%
| market share - it was extremely fringe in 1997 but it's
| still very fringe now.
|
| No reasonable person thinks it will ever materialize
| (let's call that cracking double digits) at this point.
| If it weren't for the pumpers, shills, bag holders, etc
| driven by greed (often desperation) and direct financial
| incentive the unsuitability of crypto for the general
| population would be as widely and universally agreed upon
| by now.
|
| The crypto ecosystem has also had the benefit of equating
| to "get rich quick" for many people along with investors,
| ICOs, etc pouring at least tens of billions of dollars
| into the ecosystem. Yet one look at a block explorer for
| any chain tells you very quickly that usage is abysmal.
|
| If you look at the resources poured into the space and
| real on chain transaction data crypto likely has the
| highest user acquisition cost of all time.
|
| I don't think it will ever die but if anything resembling
| widespread adoption hasn't happened by now it almost
| certainly isn't ever going to and this was my point: it's
| impossible to reach widespread adoption when the
| fundamental properties go against the most well
| established truths of humanity, society, and culture.
| cultureswitch wrote:
| I agree with you, but I also think the other things we call
| currency are equally dysfunctional in different ways.
| nathias wrote:
| yea, the owner of the current world currency attacking it makes
| all the more evident right?
| TX81Z wrote:
| There's a third perspective, largely unspoken: organized crime
| is a valid use-case for crypto and it will likely remain so.
| Even if all "legit" CEXs went bust you'd still have a path for
| cross-boarder transfers of value that can be exchanged on local
| black markets.
| nubb wrote:
| congrats on this successful karma farming post
| avip wrote:
| What we need less of is dichotomic views on complex issues.
| throwway120385 wrote:
| It seems like the people who use it successfully are either in
| on the scheme and waiting for it to start to fall, or they're
| using it as a very distributed version of Western Union to
| transfer money to other people across national borders.
| [deleted]
| samstave wrote:
| Crypto will never be a global currency until the rothschild-
| central-banks are in full control of it.
| jfghi wrote:
| I prefer those banks over the current crop of initial-named
| "CEOs"
| gemstones wrote:
| I think you might be missing some people in your reasoning,
| there. (But I agree that your two types of people both exist
| and are the loudest in the room!)
|
| (Some) crypto is a deflationary store. There are not many
| deflationary stores, and the ones that exist (like precious
| metals) either require a lot of effort to store and secure, or
| you hold a claim on some precious metal somewhere and not the
| thing itself. Lots of people want a deflationary store,
| especially in a time when inflation looks like a fact of life!
|
| Crypto has no inherent value, unlike precious metals. It can
| (and depending on the crypto, often does) go to zero. That is a
| risk of the currency. However, if I were to buy a claim on
| precious metals, I would still have the risk of going to zero
| (maybe if things really go sideways, no one wants to honor my
| claim to the metals?)
|
| Crypto will not be useful as a currency for everyday
| transactions, it is useful only as a thing to hold and store,
| or useful as a part of black-market transactions. I don't want
| to make any black-market transactions, but I do want something
| deflationary to hold and store.
|
| So the target market for crypto you're missing are people:
|
| * Who want a deflationary asset
|
| * Who are comfortable with the idea that the actual trading
| activity attracts a lot of criminals, but don't intend to do
| anything criminal themselves
|
| * Who view the risk of a Bitcoin or Ethereum going to zero
| about the same as their contacts for gold going to zero in a
| true financial crisis
| marcosdumay wrote:
| Investing in "deflationary assets" is exactly the greater
| fool theory.
| gemstones wrote:
| Sounds like a great theory, TBH! Seems like you can make a
| lot of money that way, not sure why I should view it as a
| bad thing.
| gemstones wrote:
| It really depends on the timescale, right? There are a
| couple of extremes.
|
| One extreme: At some point far in the future, perhaps
| dollars aren't a thing anymore - the last people holding
| dollars are the greater fool. (Note I still hold dollars
| and ETFs and conventionally safe investments, that's not
| a knock on the dollar.) But over a long enough timespan,
| there's a greater fool. There are just a lot of people
| along the way who got a lot of value out of dollars.
|
| Another extreme: There are things like beanie babies
| where there is a very short amount of time to find a
| buyer, and the last one to buy the beanie baby before the
| fad stops is the greater fool. This is over a much
| shorter timescale, and there are only a few people who
| get a lot of value out of beanie babies.
|
| Crypto is somewhere in between. I think the black market
| use case means crypto is closer to the dollar side of the
| spectrum than the beanie baby side of the spectrum. I
| think there's a decent chance there is always a greater
| fool in decades, well long enough for me to get out while
| I've gotten value out of it.
| EdwardDiego wrote:
| Sucks when you're the last and greatest fool though.
| vikramkr wrote:
| Why does it sounds like you can make a lot of money that
| way? Bring reliant on someone else being willing to pay
| more on the basis that they'll find someone else later to
| pay even more doesn't create a stable foundation
| web3-is-a-scam wrote:
| The "true believers" need a greater fool to be their exit
| liquidity, it's that simple.
| Canada wrote:
| > crypto's usability as a currency is practically 0.
|
| I don't read any comments here from anyone who uses it as a
| currency, and yet I personally do. For me it works really well.
| I don't buy coffee with it, I swap it for cash for that
| purpose, but I've paid most larger bills with it for more than
| 2 years. I had a good initial experience being paid with it
| years ago.
|
| I find it extremely convenient. I prefer it very much now. It
| is currently my preferred method of accepting payment. I guess
| I'll just keep using it until it all collapses or whatever.
| oblio wrote:
| > but I've paid most larger bills with it for more than 2
| years.
|
| Do you have examples?
|
| Have you paid rent, your mortgage, your car, for a laptop,
| etc, with cryptocurrency?
| cde-v wrote:
| Just because you can and do doesn't mean you should.
| DigiDigiorno wrote:
| Every time a crypto article is posted there are a large amount
| of people who are only capable of thinking in absolutes like
| you.*
|
| I don't think it's a very good currency (in the tx time/volume
| sense), but I think viewing crypto's viability as an all-or-
| nothing game is unreasonable--that includes both those for it
| and those against it. As for your assertions about failures:
|
| - CEXs have failed (in the worst way possible too, see MtGox,
| BTC-e, FTX), but that doesn't mean they have all failed--or
| that there isn't a future for them.
|
| - Hardware wallets haven't failed at all really. Like, Trezor
| and Ledger are the largest I think, and those are fine AFAIK.
| Are you referring to Ledger's recent news with the optional
| update including a backdoor for those that want to sync keys
| with Ledger's new service? (Seems like a dumb business decision
| imho, seems oxymoronic--hardware wallet as a service? lol)
|
| - Soft wallets have been hacked and are risky, but I think the
| success rate here is pretty high. A large percent of crypto
| users use soft wallets like Brave's Wallet and MetaMask, the
| vast majority of these are fine AFAIK. Not exactly safe IMO,
| but considering the amount of people who use them and haven't
| been hacked, this is certainly not an obvious "failure"
|
| Also, unrelated to crypto, but reducing people who disagree
| with you to "kool-aid drinkers" and "accidentally correct
| people" is a negative life choice IMO
|
| * I think you are capable of not thinking in absolutes, I just
| wanted to be mean on the internet
| EdwardDiego wrote:
| Maybe they're a Sith. But hey, the dark side is a pathway to
| abilities many consider... unnatural.
| hdjjhhvvhga wrote:
| > * I think you are capable of not thinking in absolutes, I
| just wanted to be mean on the internet
|
| While I disagree with your post, that last frank comment made
| me smile.
| perardi wrote:
| "Cryptocurrencies can work, we've just never had a properly
| decentralized system yet" is becoming the "Communism can work, we
| just haven't really tried it yet".
|
| This is yet another example of the crypto boom going bust, which
| has been a series of unregulated and utterly opaque exchanges
| collapsing. Over and over again, the entire ecosystem has been
| snake oil salesmen, who are selling snake oil to other snake oil
| salesmen.
|
| And the crypto purists will cry "oh, but Bitcoin, it would work
| if we all held dear to the purity of the concept and kept our
| relevant info in lockboxes in our panic rooms!" And the cynical,
| but also correct, among us will mutter "well that's cool, but no
| normal human is going to do that, and the valuation of whole
| thing is based on mass uptake, and that's contingent on having
| middlemen do a lot of the ugly gruntwork, because otherwise it's
| far too difficult for normal users to ever bother with." And
| those middlemen are, again, invariably, snake oil salemen who
| will cut and run.
| [deleted]
| lesuorac wrote:
| How many recessions / depressions need to happen before you
| claim that fiat money doesn't work?
|
| If you can exchange crypto for goods and services then works.
| period; no need to move any goal posts.
| Karunamon wrote:
| It really is that simple. For all its problems, the fact that
| I can move my money anywhere, without middle men, is the main
| promise of crypto fulfilled, everything else on top of that
| is gravy.
| majormajor wrote:
| Recessions/depressions seem like more of a potential
| indictment of capitalism than currency. Crypto would
| certainly not eliminate those in any scenario.
|
| Many fiat currencies pass the "exchange for goods and
| services" test you propose. Many crypto coins would fail
| them, depending on how broadly we want acceptance to be.
| jcq3 wrote:
| Cryptos aren't dependent on CEX to work, your analogy is wrong.
| anigbrowl wrote:
| Then why did crypto exchanges come into existence, if they
| don't address any need?
| mhluongo wrote:
| Bitcoin is working. Ethereum is working.
|
| In what world do you think that "Bitcoin working" implies all
| centralized bad actors are washed out? All middleman are toast?
| This stuff takes time, and the existence of middlemen doesn't
| negate the premise that blocks keep being mined without
| censorship.
| methodical wrote:
| Yes, except of course the fact that Bitcoin/Eth without the
| ability to convert it to fiat is functionally worthless,
| except for the people with their heads in the clouds who
| think that at some point the entire global economy will move
| to Bitcoin (which can't even handle a fraction of the
| transactional throughput of MC or Visa). Crypto, while nice
| in theory, has proven to not work in reality, time and time
| again. Centralization is necessary for a lot of niceties in
| order to make crypto a functional currency, and yet
| centralization is also counter to all of the values of
| crypto. Anybody still hanging onto crypto is probably
| latching onto greater-fool theory and hoping they aren't the
| greatest fool, although at this point, they likely are the
| end of the line.
| Karunamon wrote:
| Your first statement is strictly false, it is not difficult
| to find places to spend either of those currencies.
| (Thereby disproving your third statement)
|
| Your second is a strawman, the "entire global economy" need
| not moved to crypto for it to be useful.
|
| The entire rest of your post is a stack of shallow,
| dismissive tropes that contribute nothing to the
| discussion.
| kkielhofner wrote:
| > it is not difficult to find places to spend either of
| those currencies
|
| I beg to differ. There's a reason actually paying with
| Bitcoin/ETH/crypto somewhere (anywhere) is celebrated on
| crypto twitter, /r/bitcoin, etc.
|
| After 14 years it's still a novel and rare enough
| experience people feel the need to record videos of it
| and post them online to celebrate "adoption".
|
| Imagine sending a tweet in 2020 (14 years after founding
| of Twitter) being noteworthy. Ridiculous, right? That's
| what crypto looks like to those of us not trapped in the
| bubble/echo chamber.
| smithcoin wrote:
| Then why do "we" celebrate every little thing happening
| on Mastodon? Ridiculous right?
| kkielhofner wrote:
| Mastodon is at best seven years old. We're talking about
| 14 when it comes to crypto. Mastodon also doesn't have
| the "get rich quick" user adoption lure that has driven
| the majority of crypto "adoption".
|
| On that note, I once again point to crypto twitter,
| /r/bitcoin, etc where you see "what's your retirement
| plan with crypto?" posts constantly.
| ineedasername wrote:
| >it is not difficult to find places to spend either of
| those currencies
|
| There are literally no services I use or products I buy
| that take bitcoin.
|
| From weekly groceries to my car insurance or, well,
| anything... none take bitcoin. The overlap between
| businesses that accept bitcoin and the things 99.9999% of
| people need to live their lives on a daily basis would
| not be distinguishable to the human eye on a venn
| diagram.
| methodical wrote:
| And yet you don't directly provide any evidence to the
| contrary, highlighting that the person who is providing
| nothing is actually you and your comment of unsupported
| contradictions.
|
| Does your utility company take crypto? Mine certainly
| doesn't. Therefore, in order for me to use crypto as a
| currency, I need to be able to convert it to fiat. Point
| out where exactly this is incorrect, or in what way
| crypto can address it without making some dreamy
| assumption that the world shifts to using crypto as the
| global currency (which will simply never happen). Did I
| say nobody accepted crypto? Nope, never said that.
| crote wrote:
| I wouldn't exactly call it "working" when the largest trading
| platforms turn out to be fraudulent, the value is highly
| volatile, the whole "immutability" thing is thrown out as
| soon as people are inconvenienced by it, and transaction
| volume always remains negligible. The only people for who
| Bitcoin is working is those using it for ransomware
| extortion.
| mhluongo wrote:
| Is a public company not working of the exchange it's traded
| on is fraudulent? No -- it can still offer governance
| rights and potentially dividends.
|
| Does gold not work if the exchange it's traded on is
| fraudulent? No, it can still be held and traded peer to
| peer, and it can still be used in manufacturing.
|
| You're conflating the market with the actual network. The
| Bitcoin network works just fine.
| super256 wrote:
| I wonder if Coinbase could steal all the volume from
| Binance if they would offer 0% fees on spot. I bet most
| other markets would implode.
| hiatus wrote:
| > which has been a series of unregulated and utterly opaque
| exchanges collapsing
|
| It seems the issue with Binance was that it was running afoul
| of regulations. In what way is that "unregulated"?
| JumpCrisscross wrote:
| > _the issue with Binance was that it was running afoul of
| regulations. In what way is that "unregulated"?_
|
| "Blatant disregard of the federal securities laws and the
| investor and market protections these laws provide" means
| acting unregulated, even if one is properly subject to
| regulation [1].
|
| [1]
| https://www.sec.gov/files/litigation/complaints/2023/comp-
| pr...
| mangecoeur wrote:
| _shocked picachu meme_
| madars wrote:
| Archive: https://archive.is/IciUF
| pyrophane wrote:
| > The Wall Street regulator said Binance had been mixing
| "billions of dollars" in customer funds and secretly sending them
| to a separate company called Merit Peak Limited, which is
| controlled by Binance's founder, Changpeng Zhao.
|
| This sounds very much like what FTX was accused of doing.
| belter wrote:
| "Happy the man who has learned the cause of things and has put
| under his feet all fear, inexorable fate, and the noisy strife
| of the hell of greed." -
| Publius Vergilius Maro
| belter wrote:
| "The S.E.C. said the world's largest cryptocurrency exchange
| mixed "billions of dollars" in customer funds and secretly sent
| them to a separate company controlled by Binance's founder,
| Changpeng Zhao."
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