Crypto exchange Binance has been in the news lately due to a lawsuit filed by the US Commodity Futures Trading Commission (CFTC) accusing the exchange of regulatory violations. The allegations have caused some investors to lose confidence in the exchange, leading to the withdrawal of significant amounts of cryptocurrency from its wallets.
According to data from Thanefield Capital, almost $1.5 billion left major exchanges such as Binance, Kraken, Coinbase, and Bitfinex in the 12 hours preceding the CFTC indictment.
1/ Large on-chain movements prior to the Binance indictment
A few hours before the Binance CFTC Indictment, there were large stablecoin withdrawals across centralized exchanges, totaling almost $1.5B in just 12 hours
Notably, Binance itself saw an $850M outflow. pic.twitter.com/yLD7f1cgmB
— An Ape's Prologue (@apes_prologue) March 27, 2023
Of this amount, over $850 million was withdrawn from Binance. In the hour following the announcement, Binance saw an additional $240 million withdrawn.
Binance CEO Changpeng “CZ” Zhao responded to the lawsuit, expressing disappointment in the civil complaint and emphasizing Binance’s cooperation with the CFTC over the past two years.
https://twitter.com/cz_binance/status/1640483997288415234?
In addition to the CFTC, Binance has been under investigation by the Internal Revenue Service (IRS) and federal prosecutors for compliance with Anti-Money Laundering (AML) rules, and the Securities and Exchange Commission (SEC) for allowing U.S. traders to access unregistered securities.
In his response, Zhao outlined key points where Binance disagrees with the allegations in the CFTC complaint.
He stressed that Binance.com was the first global (non-US) exchange to implement a mandatory Know Your Customer (KYC) program and maintains one of the highest standards in KYC and AML compliance.
In his statement, Zhao reiterated Binance’s dedication to finding amicable solutions to all problems and maintaining collaboration with regulators and government agencies worldwide. He acknowledged that while the company is not perfect, it holds itself to a high standard, often exceeding existing regulatory requirements.
Despite Zhao’s efforts to alleviate concerns and emphasize Binance’s cooperation with regulators, the market has reacted with cautio, some investors have pulled their assets from the exchange.
In the past week, Binance’s Bitcoin balance was reduced by over 3,900 BTC, of which 3,400 BTC were withdrawn within 24 hours of the CFTC announcement.
Meanwhile, competing exchanges such as Coinbase, Bitfinex, and Gemini recorded an increase in BTC reserves during the same 24-hour timeframe.
It is worth noting that Bitcoin balances on major exchanges have been declining since March 20, with nearly 27,000 BTC leaving these exchanges over the past seven days.
Binance still holds over $63 billion worth of cryptocurrency assets, including significant amounts of Tether, Bitcoin, and Ether.
In addition to the CFTC’s lawsuit against Binance and CZ, a federal judge temporarily halted a proposed deal between Voyager Digital Ltd. and Binance.US. Judge Jennifer Rearden of the U.S. District Court for the Southern District of New York granted the emergency stay on March 27, suspending the potential deal between Voyager and Binance.US until a decision is made on the Department of Justice’s appeal against the bankruptcy plan.