Trust in the whole industry has been destroyed as a result of its rival FTX’s collapse last month under a barrage of accusations of fraud and criminal activity.
In a three-day frenzy last week, customers withdrew more than $6 billion from Binance, including more than $3 billion in a single day.
Due to “public misunderstanding” of what they were offering, auditing company Mazars immediately stopped working with all cryptocurrency startups on Friday. Binance had hired Mazars to give a “proof of reserves” report.
A “proof of reserves” report is not a thorough audit and does not include liability information. According to media reports, US authorities were still considering charges against the firm and perhaps its co-founder and CEO, Changpeng Zhao, for money laundering and violating sanctions. The business has declined to respond to the investigation.
The stakes are at an all-time high. The survival of Binance is critically necessary, according to Dan Ashmore, an analyst at the cryptocurrency investing firm Invezz. Failure would severely blow cryptocurrency and probably bring a sizable portion of the market down with it.
If Binance failed, according to Leigh Drogen of Starkiller Capital, it would be “armageddon” for the short-term pricing of crypto assets.
– Zhao’s public appearances haven’t done much to ease investors’ “confused and terrified” feelings.
In a recent interview with CNBC, he stated the company “sort of forgot” about a portion of a $2.1 billion payment that Binance received from FTX last year.
Zhao said that a “large part” of the money had been paid in FTX’s internal token, which is now useless, but it was 18 months before Binance remembered and transferred the money, which was then worth $580 million.
Genevieve Roch-Decter of Grit Capital questioned whether forgetting about over $500 million was intended to increase her faith in Binance’s capacity to manage an exchange in an opinion post for the cryptocurrency popular news sites.
Zhao is criticised for frequently making public remarks that are unclear and occasionally conflicting.
He says he wants openness, yet Binance won’t even reveal the most basic facts about the company—like where it is registered—let alone subject to a thorough audit, as a publicly traded corporation would be required to do.
Zhao is said to be friendly with authorities in certain places but maintains his primary operation hidden from curious eyes in the Cayman Islands.
While he emphasises the dependability and expertise of his company, his personal Twitter account gives the impression that it is a one-man show supported by interns.
Sam Bankman-Fried, the CEO of FTX, is now being held in detention for extradition to the United States on allegations of financial crimes, and e stated Zhao’s behaviour was “eerily similar” to that of Bankman-Fried.
Everyone is quite perplexed and terrified about that, Drogen added.
A company spokeswoman responded via email to a request for clarification on Binance’s organisational structure by stating that “the Binance.com worldwide business works through a variety of firms formed in a range of jurisdictions.”
He asserted that the blockchain technology that underpins cryptocurrencies is “inherently transparent”.