Financial screws are tightening on Binance as regulatory authorities increasingly refuse to give the world’s largest digital asset exchange the benefit of the doubt.
On Monday, National Australia Bank (NAB) joined the local push to deny services to ‘high-risk cryptocurrency exchanges,’ following the lead of Westpac, ANZ and Commonwealth Bank. An NAB spokesperson told the Australian Financial Review that the bank’s “approach is going to be consistent with the rest of the industry.”
Pressed on whether this ‘high-risk’ list included Binance, the NAB’s head of fraud Chris Sheehan said only that the bank had “concerns” with “crypto exchange A” and so “we’re not going to allow payments to go there. If we start to see, as always happens with criminal groups, they pivot to start targeting something else, we can change our rule settings as we go.”
Binance’s down-under dilemma began in April with the Australian Securities & Investments Commission (ASIC) rescinding the license held by Binance Australia’s derivatives platform. Binance, which acquired the derivatives license by buying an already licensed company, was accused of offering high-risk products to unqualified retail investors.
Aussie banks quickly followed ASIC’s move, citing reports over the high number of crypto-related scams inflicted on Australians in 2022, which were up 162% from 2021. Binance’s local banking partner Cuscal, which offered access to the PayID transfer system, dropped Binance around the same time.
Earlier this month, Bloomberg reported that ASIC officials had conducted searches at Binance Australia offices, seeking more insights into the derivatives issue. Binance officials issued a terse comment saying they were “cooperating with local authorities” but otherwise said little about the developing probe.
Australia is far from the only jurisdiction shining an unflattering spotlight on Binance’s operations. In the past few months alone, Binance has lost its EUR payment rails, been kicked out of the Netherlands, Belgium and Canada, been denied a license in Germany and had its French offices raided as part of a probe into suspected ‘aggravated money laundering.’
Of course, all of this is just the warm-up act to the main event, aka the imminent filing of criminal charges against Binance and its controversial founder Changpeng ‘CZ’ Zhao by the U.S. Department of Justice. Those charges would build on civil suits previously filed by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Death by a thousand (or 3,000) cuts
Last week, several senior Binance execs abruptly left the company, reportedly due to their unease with the combative approach employed by CZ in response to the U.S. criminal probe. Coming just days ahead of the exchange’s sixth birthday, the C-suite skedaddle wasn’t exactly the strongest vote of confidence in Binance’s future prospects.
This weekend, a screenshot of a company email surfaced online, which purported to show Binance informing staff of a number of employee benefits that “will be ceased effective immediately (June 19, 2023) until further notice.” The withdrawn benefits range from reimbursements for everything from fitness to work-from-home to mobile phone expenses, as well as allowances for childcare and ‘new marriages.’
The announcement justified the cuts by saying that “when times are tough, the business needs to reduce its expenses.” The tough times were blamed on “the current market environment and regulatory climate that has unfortunately led to a decline in profit.”
The Wall Street Journal subsequently confirmed the benefit cuts as accurate, while adding that CZ told staff last Friday that the company was still profitable (although wash trading commissions don’t count). However, CZ couldn’t offer staff a timeline for when their benefits might return.
The situation is likely far worse than Binance is letting on publicly. Last Friday, the Wall Street Journal reported that Binance had sacked over 1,000 staff in recent weeks. Some staff were offered severance pay consisting of Binance’s in-house-backed-by-nothing-sketchy-AF BNB token, and only on the condition that they sign a non-disparagement agreement and never speak publicly about said agreement.
The same day, CNBC reported that Binance’s layoffs could top 3,000 by year’s end—out of a global total estimated at 8,000—according to a current Binance staffer who claimed (hoped?) that the DoJ probe would likely end in a consent decree or settlement.
Following these reports, CZ activated his usual denial-of-reality force field, tweeting that the number of “involuntary terminations” cited in the media were “all way off.” CZ insisted that Binance was “still hiring” as part of its apparent goal of increasing “talent density.” CZ also played his omnipresent ‘4’ card, based on his four-point new year’s resolution in which ‘4’ represented a desire to ignore inconvenient truths.
But the sheer deluge of regulatory crackdowns amid rapidly diminishing reserves has left CZ looking like a certain mustachioed leader in a Berlin bunker in late-April 1945, summoning the power of will to ignore the dust raining down from the ceiling as explosions rock the street overhead.
More than a few Twitter wits have noted that the Chinese word for ‘4’ is a homonym for ‘death,’ and that perhaps CZ’s constant use of this number is actually a Freudian admission that his criminal operation is living on borrowed time.
Slapped by the hand of God
In yet another totally positive development, Binance’s Argentine unit has severed its ties to the Argentine Football Association (AFA), tweeting Monday that the AFA “has not fully met its contractual obligations, which goes against our business values and our association principles.” The AFA has yet to publicly comment on the development.
It was only a year ago that Binance inked a five-year deal with the AFA that included the sponsorship of Argentina’s national team, league naming rights and enshrining BNB as the official AFA fan token.
For a shady outfit like Binance to be claiming that the AFA’s principles are the deficient ones, one has to wonder what kind of shenanigans the AFA got up to. Although, one can’t ignore the distinct possibility that Binance is simply trying to save face while desperately looking to shed a US$40 million obligation it can no longer afford.
Next: carrier pigeons with money belts
With cash running low and traditional financial rails increasingly off limits, Binance is hastily expanding alternative means of facilitating customer deposits. On Sunday, Binance announced that it had completed its integration of the Lightning Network to permit deposits and withdrawals of the BTC token to the exchange.
Lightning is the layer 2 ‘solution’ to the BTC blockchain’s notorious bandwidth issues. Primarily operated as a proprietary network of Blockstream, Lightning attempts to alleviate BTC’s seven-transactions-per-second limit by conducting business off-chain in a pseudo BTC token that doesn’t require transactions to be written on BTC’s main layer.
Lightning has been widely criticized for the frequency with which transactions fail, leading even prominent BTC supporters to mock the increasingly popular suggestion of using AI to navigate the best route to ensure transactions go through. In keeping with Blockstream’s ‘cypherpunk’ origins, Lightning has also been criticized for adding an extra layer of obfuscation for those looking to move ill-gotten gains away from authorities’ prying eyes.
On a related note, Sunday also saw Binance announce a new feature by which users can deposit via up to 20 different addresses on a single network. The feature is starting with Ethereum and Ethereum-based networks like Binance’s in-house BNB Smart Chain, with more blockchains to be supported “at a later stage.”
The move is pitched at achieving “enhanced efficiency” but will also likely be welcomed by those interested in making it far more difficult to trace transactions back to their source. And hey, 20 deposit addresses per blockchain presumably mean more deposits for Binance! Now, about those withdrawals…
Law & disorder
Stateside, Binance’s U.S.-registered offshoot Binance.US has been cut off from U.S. dollar transactions following the SEC/CFTC civil suits and the resulting skittishness of U.S. banks to be seen associating with this sinking pirate ship.
This impairment, along with a healthy reluctance by U.S. customers to keep assets on the exchange, has led to some significant variations in the fiat value of certain tokens on Binance.US compared with the more uniform valuations on other exchanges.
While these devaluations have impacted tokens such as BTC, the latest eye-opening decline is in the value of the Tether (USDT) stablecoin, which has dramatically slipped its 1:1 peg with the U.S. dollar, trading well below 80¢. With Tether refusing to redeem USDT at source for any sum under $100,000—and even then, there’s no guarantee of redemption unless you’re a favored insider—rank-and-file USDT holders are left holding the (rapidly emptying) bag.
If it pleezes da court…
Finally, an individual identified only as Eeon has filed a petition to intervene in the SEC’s civil suit against Binance. The at-times awkwardly worded petition—which openly relies on AI to make some of its arguments—claims Eeon “possesses over 30 years of experience and engagement with the courts” (although it doesn’t specify whether as plaintiff, defendant or dedicated Judge Judy fan).
Eeon, who cites a Las Vegas virtual mailbox address and claims to have “well over $600,000.00 in the system,” also claims to represent a class of Binance customers who don’t like Binance nor the SEC and want their tokens back, dammit.
Eeon summarizes the legal situation before the courts thusly: “Two Juggernauts/Behemoths decided to have a wrestling match in the middle of an ant farm and the ants have no say so as to when the fight takes place, how the fight takes place, and/or the rules of the fight, only that they are in the direct path of the assault upon the two predator sociopaths or amount of damage cause [sic] as a result of their extracurricular activities.”
We encourage you to read the whole filing, along with the accompanying petition for redress, which “challenge[s] any claim that a person’s statement can be used against them in a Court of law” and maintains that “stating that you do not wish to be regulated does not imply an intention to intentionally violate the law.”
Elsewhere, Eeon declares that the Howey Test is unconstitutional, the SEC’s actions “may be interpreted as tantamount to treason, rebellion and/or other insurrection activities,” and that Eeon’s filings were run through an AI language model to ensure that “any party reading it who is above 18 years of age would get the basic understanding and at most certainly a lawyer or a judge would understand the complexities of the information herein presented.”
Someday, all this speculative crypto casino nonsense will be but a distant memory and the world will be a better place for it. Until then, to paraphrase Commissioner Gordon, Eeon is the hero crypto deserves.
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