Binance commingled user funds with corporate funds in 2020 and 2021, Reuters reported on May 23, citing three anonymous insiders. One of the sources claimed that billions of dollars were commingled in Binance’s accounts with Silvergate Bank, with the commingling occurring on an almost daily basis. Reuters couldn’t verify the total figures, but it reportedly […]
Binance commingled user funds with corporate funds in 2020 and 2021, Reuters reported on May 23, citing three anonymous insiders. One of the sources claimed that billions of dollars were commingled in Binance’s accounts with Silvergate Bank, with the commingling occurring on an almost daily basis.
Reuters couldn’t verify the total figures, but it reportedly reviewed a bank statement that showed the company mixed $20 million from a corporate account with $15 million from an account that received user funds on Feb. 10, 2021.
Binance’s chief communications officer Patrick Hillmann refuted the claims in the Reuters story, calling it a “conspiracy theory” with “zero evidence.”
In a statement to Reuters, Binance spokesperson Brad Jaffe said:
“These accounts were not used to accept user deposits; they were used to facilitate user purchases [of crypto]. There was no commingling at any time because these are 100% corporate funds.”
Jaffe further explained that when users sent money to the concerned accounts, they were not depositing funds but instead purchasing the BUSD stablecoin from the exchange. This process was “exactly the same thing as buying a product from Amazon,” he added.
Commingling funds by converting them to crypto
According to documents reviewed by Reuters, Binance’s company revenues went into a Silvergate account held by the exchange’s Cayman Islands holding firm, Binance Holdings. On the other hand, user funds went into a Silvergate account of a Seychelles-based firm called Key Vision Development, controlled by Binance CEO Changpeng Zhao, per the report.
Binance commingled customer funds with company revenue in a third Silvergate account held by a Cayman Islands-based firm controlled by Zhao, the report noted. The funds from this account were converted into BUSD, according to Reuters’ sources. Binance converted $18 billion into BUSD between January 2020 and December 2021, blockchain data shows.
Converting funds to crypto could have potentially allowed Binance to mislead authorities about their tax obligations, the Reuters report said. One of the sources added that Zhao converted the funds to BUSD because he did not trust banks.
The person with group-level knowledge of Binance said there was also another motivation: Zhao distrusted banks over his concern that they could freeze his company’s accounts, he once said in an interview.
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