That’s the main fear of all the users including ourselves. Unfortunately, there is no 100% confirmation that the company is financially stable. Although data shows that TVL is high and some other sources also sound affirmative.
Earlier we wrote that Binance halted USDC withdrawals for a few hours as they saw a strong increase in withdrawals. CZ said that Binance processed over $1.1 billion in net withdrawals on Dec 13, but other sources suggested the volume could have been higher (up to $14 billion during that week!). The company managed to settle the situation which is a very good sign.
But are the company reserves completely stable and can they survive another situation like that?
We recently wrote that BUSD loses market capitalization amid Binance fears - that’s definitely a bad sign! Of course, if the stablecoins in Binance’s reserves hold to their peg, everything will be alright. But it is so typical for the crypto world: everything is alright … until it’s not.
Mazars Group audit results were deleted.
Yes, Mazars Group deleted the recent report that proves (or maybe it doesn’t prove?) that Binance controls around $9.7 billion of its users’ funds in bitcoin. Of course it is worth mentioning that the auditor has paused its work with all crypto companies, but Binance could just use the services of the Big 4 to confirm its reserves instead of Mazars. CZ says that these accounting firms don’t work with crypto exchanges, but Coinbase just received an attestation report from Deloitte.
$2.1 billion from FTX.
It is confirmed by CZ that Binance got $2.1 billion in FTT and BUSD from FTX for its share. If the clawback of these funds happens that might be a problem. But it is worth noticing that FTT price fell sharply since then so today the USD equivalent might be way less than the original amount.
A long-running criminal investigation which is focused on Binance's compliance with U.S. anti-money laundering laws began in 2018, Reuters says. According to the news agency, some prosecutors believe that there is already enough evidence to file charges against executives including CEO Zhao. The article also says that people familiar with the matter claim that the exchange discusses potential plea deal with Justice Department officials, as it is afraid to wreak havoc on a crypto market.
Despite all the FUD CZ seems to be as self-assured as always. He makes jokes about gossip and shares news about the company’s new projects and successes.
Maybe everything is fine indeed as Binance seems to have assets for further expansion…
… and says that it is ready to hire more people, although other exchanges are laying off staff during the crypto winter.
At the same time according to Bloomberg, CZ warned staff to “expect tough months ahead”. Although he said the firm will overcome current challenges.
Since we are talking about staff, here is another terrifying sign. There are rumours that Binance has no CFO:
This sounds completely ridiculous to us. If there is no CFO, there is no general understanding of the company’s state, there is no strategy and rules, there is no responsibility… Maybe these are rumours, but it was also reported by Reuters that Binance's former CFO Wei Zhou did not have access to the company's full financial accounts.
All in all, the FUD around Binance might be just a consequence of the current market condition, recent scandals in the industry (e.g. FTX collapse) and overall negative sentiment. At the same time, all crypto companies and exchanges have close ties, which means that Binance can easily become the next one to fall as the FTX litigation process goes on and new details emerge.