Binance has been accused of assisting Chinese nationals to evade restrictions despite the crypto ban in the region.
Users reportedly trade $90 billion in crypto-related assets on the exchange in a month. 

In 2021, China banned financial institutions from facilitating crypto transactions. The country also banned all domestic crypto miners and outlawed the asset class some months later. Interestingly, World’s largest crypto exchange Binance is reportedly operating despite the ban as users traded $90 billion worth of cryptos in a month. This is said to account for more than 20 percent of trading volume worldwide. 

According to the report by the Wall Street Journal which cited internal figures and current and former employees of Binance, the $90 billion excludes trades by a small group of big traders. The Binance employees are claimed to often discuss the importance of operations in China.

Also, there are claims that the investigations team works with Chinese authorities to prevent criminal activities among about 900,000 active users in China. An undisclosed internal document reveals that the exchange assists users in China to bypass restrictions. This is done by directing them to some Chinese domains before rerouting them to the platform. 

Per the research, it was disclosed that most of the trading was in futures contracts that are tied to cryptos. It is important to note that futures trading is banned in the US. This comes as a shock as the exchange and its CEO Changpeng Zhao claimed to have left mainland China in 2017. A spokesperson of the exchange is reported to have said:

The Binance.com website is blocked in China and is not accessible to China-based users.

Behind China was South Korea which contributed about 13 percent shares of US$58 billion of its trading volume. This was followed by Turkey, Vietnam, and the British Virgin Islands. 

Binance Also Sued by SEC

The US Securities and Exchange Commission has recently filed a lawsuit against Binance for lack of disclosure, conflicts of interest, etc. 

SEC Chair Gary Gensler commented:

Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied. They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value U.S. customers on their platforms. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.

According to the court document, Zhao and Binance subverted their controls to allow high-value US customers to trade on the platform. Zhao meanwhile alleged that US customers are prohibited from transacting on the platform. The document further mentions that Binance.com and Binance.US are controlled by Zhao, and operated as exchanges, brokers, dealers, and clearing agencies. He earned more than $11.6 billion in revenue. 

The exchange started operating in Japan after acquiring the Sakura Exchange BitCoin (SEBC) last year. 

 

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Filed under: Bitcoin - @ August 3, 2023 7:18 am