- Investors are keeping a close eye on Binance’s activities after the sudden collapse of FTX.
- The cryptocurrency exchange giant is being probed by the Department Of Justice over its reserves.
- CEO has warned staff that the crypto exchange is facing a trust deficit and the future is “bumpy”.
Last week, Binance, the world’s largest cryptocurrency platform, was put under pressure after millions of dollars were recovered from its coffers. The reason for this was the collapse and bankruptcy of FTX (the crypto-ecosystem founded by Sam Bankman-Fried, which was once worth $32 Billion).
Investors are now looking for signs of trouble. Could cracks start to show in Binance? Here are five facts about what’s going on with the crypto exchange.
People Worried about Binance’s Funds
After the bankruptcy of FTX proved its cash reserves were empty, investors pushed for cryptocurrency companies to prove their customers’ safety and to pay out if they had to withdraw in a hurry.
According to a report, FTX saw a huge increase in its sales. Around $4 billion worth of user funds were secretly transferred to a sister trading company, Alameda Research, and suffered losses. Binance obtained a “proof of reserves” certificate to boost confidence in its business. It hired the accounting firm Mazars to check its holdings and make sure clients can be sure their funds are in their account and not on loan.
However, legal experts and others have argued that users of the platform should not be satisfied with this experience. Mazars did not review the quality of financial controls. It did suggest that Binance was able to show that bitcoin’s assets were $245 million more than its liabilities, which was a positive sign, according to the Wall Street Journal.
According to a report, half of the company’s $75 billion in reserves is held in its stablecoin BUSD and native binance coin BNB token, according to a Bloomberg report last month.
On Friday, the accounting firm stopped working with Binance and other crypto customers “due to concerns about how the public understands these reports,” according to the Financial Times.
In a Single Hour, $3 Billion was Raised in Capital
In recent days, large withdrawals have been made due to questions about its reserves and the Department of Justice investigation. Meanwhile, cryptocurrencies have been losing faith.
On Tuesday, Binance recorded the highest daily withdrawals it has seen since 1996. According to Nansen data, net outflows of $3 billion were achieved in 24 hours. The exchange was forced to temporarily freeze USD Coin withdrawals, but increased its stablecoin holdings.
Just over a month ago, the cryptocurrency giant had $69.5 million in public assets, according to Nansen. This current total of $54.7 billion is due to large withdrawals as well as price fluctuations.