Binance caught commingling funds between US and international exchanges
dirtybubblemedia.substack.com
dirtybubblemedia.substack.com
This is when I found out Binance no longer allowed US investors, and I was redirected to a US site (Binance.us). The problem was my account was on Binance.com, and it was not migrated in anyway to this new US site.
I contacted support and they gave me a 7 day period to log in and withdraw my funds (which in itself is weird -- why not just migrate my account to the US site; why the sketchy, arbitrary 7 day period? whatever). I was finally able to log in! And I saw that my $100 investment had (unsurprisingly) turned into $17. I chuckled and tried to get my 17 bucks out anyway, only to find that the site no longer even offers a way to withdraw funds as an American!
This whole experience that spanned maybe an hour was hilarious. I've resigned to the fact that I was scammed out of a hundred bucks. Woulda been nice to use that to buy a few games on Steam, but oh well, here we are. Hope this tale at least amuses or informs someone.
I’m not sure where you missed this in your exploration. I went through this recently as well.
Thankfully my "investment" was low enough to walk away from. It was basically an experiment. Glad I did it. Now I know. Of course my wife told me it was a ponzi scheme from the start, and was completely right. The real combined value of all the crypto in the universe is zero. The market just hasn't corrected itself yet.
Monero & Zcash are exceptions and the only parts of crypto I'm bullish about (including some new upcoming chains like Ironfish & Aleo). I think private p2p cash has a lot of value. BTC & ETH are the opposite of private.
Let's say a US company gets ransomware attacked by a Russian national and demands payment in bitcoin. US company pays in bitcoin and later reports crime. All accounts get flagged. Anyone helping that address offramp the money will be in trouble. So there has to be a Russian exchange dealing with Russian banks that's creating a track record of provably aiding in crime. It's either going to be such a small amount no one cares or the Russian companies involved will be sanctioned.
Because of the public permanent record, the utility of ETH and BTC are decreasingly useful. Things like instant international settlement, fast payments, and the alike can always be better done with tradfi. Privacy and avoiding regulation was the only real utility ever.
Stablecoins are a large use case in crypto now but there isn't a private stablecoin yet (I'm ignoring all SGX based technology). A private stablecoin, fully backed by audited bank reserves would enable something like a private Venmo. This private Venmo would know how much you brought in and took out but would have no idea what your transaction history looks like. I think in the next few years we'll see a private Venmo.
To borrow an expression from Nicholas Weaver, crimes on public ledgers are just prosecution futures.
Can I have your leftovers?
It’s comments like these that make me happy that Reddit has “RemindMe!”
The only cryptocurrency that the SEC has said publicly it will not treat as a security is BTC. There are allegedly a few more but the SEC has not disclosed which ones. That leaves every other one open to SEC regulation.
Above every cryptocurrency, save for a few, hangs the sword of Damocles.
With the ongoing FTX story, it is nice to see people on HN are now able to comfortably confess their crypto losses.
Only those that fail the Howey Test, I think.
In doing so, the Supreme Court established four criteria to determine whether an investment contract exists. An investment contract is:
An investment of money
In a common enterprise
With the expectation of profit
To be derived from the efforts of others
ETH has been addressed as well as not being a considered a security (anymore). This was before the switch to PoS. I have not heard or seen anything indicating that the PoS transition would change this.
"Whether or not a particular transaction involves the offer and sale of a security -- regardless of the terminology used -- will depend on the FACTS AND CIRCUMSTANCES, including the economic realities of the transaction."
https://www.sec.gov/litigation/investreport/34-81207.pdf
June 14 2018
"I would like to emphasize that the analysis of whether something is a security is not static and DOES NOT STRICTLY INHERE TO THE INSTRUMENT.[10] Even digital assets with utility that function solely as a means of exchange in a decentralized network could be packaged and sold as an investment strategy that can be a security. If a promoter were to place Bitcoin in a fund or trust and sell interests, it would create a new security. Similarly, investment contracts can be made out of virtually any asset (including virtual assets), provided the investor is reasonably expecting profits from the promoter's efforts."
Further...
"[1] The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author's views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff."
https://www.sec.gov/news/speech/speech-hinman-061418
Fall 2018
40:20 Gensler says ETH "passed the Howey Test", i.e., it is a security. 46:04 Gensler says XRP is a security.
https://ia903107.us.archive.org/23/items/MIT15.S12F18/MIT15_...
March 7 2019
"Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman's June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument."
April 6 2021
https://coincenter.org/files/2019-03/clayton-token-response....
"MR. BLISS: So I want to make clear that this is my understanding of the current situation and I don't want to be overly technical but the SEC, itself, my understanding, it has not taken an official position. There is no action that it took to say Bitcoin is not a security, Ether is not a security. Now, there was a speech by a high-ranking person who said that to him that's what it looked like but there has been no action letter, no enforcement action, none of the official ways in which the SEC takes a position on that matter that has occurred. What I understand defendants to be referencing is the speech by Mr. Hinman which is not an official statement of the Securities and Exchange Commission itself."
https://www.crypto-law.us/wp-content/uploads/2021/04/210406_...
June 23 2021
"11. On June 14, 2018, I delivered a public speech entitled "Digital Asset Transactions: When Howey Met Gary (Plastic)" (the "Speech"). I began the speech with the following disclaimer: "My remarks are mine alone, not necessarily those of the Commission, the Commissioners, or the staff." The text of the Speech, which is publically available on the Commission's website, contains a similar disclaimer: "The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author's views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff.""
"13. The Speech was intended to express my own personal views. During my preparation of the Speech, I discussed my thoughts with other Commission employees, as part of the Commission's ongoing deliberations about whether offers and sales of Ether constituted securities transactions. To the best of my knowledge, the Commission had not taken at that time, and still has not taken, any position or expressed a view as to whether offers and sales of Ether constituted offers and sales of securities."
https://www.docketalarm.com/cases/New_York_Southern_District...
April 4 2022
"We already have robust ways to protect investors trading on platforms. And we have robust ways to protect investors when entrepreneurs want to raise money from the public.
We ought to apply these same protections in the crypto markets. Let's not risk undermining 90 years of securities laws and create some regulatory arbitrage or loopholes."
https://www.sec.gov/news/speech/gensler-remarks-crypto-marke...
The quesion no one is willing to ask or answer is: With all their financial and legal resources, why are crypto issuers so reluctant to file registration statements?
So, saying it out loud: Binance had scammed me. Happy to jump of public debate about it on Twitter(same nickname).
The community will collectively mod nuke comments that are blatant violations of the site guidelines. Those without show-dead on will no longer see it. You can view even dead posts by turning on show-dead.
It also gives you aore accurate view of what Dang has to deal with on a regular basis.
As far as I'm aware, you can't delete a replied to post.
https://news.ycombinator.com/item?id=33464494 (208 comments)
I’m not particularly invested in the crypto space one way or another but just watching from the sidelines it seems like:
* Many things that seemed fine in this space were not fine.
* As a layman, Binance _seems_ to be in the same ballpark of trustworthiness as FTX.
Even if you are pro-crypto it just seems like there are much less risky places to put your money than Binance at this point.
Funny, because BNB was one of my best investments at the time, making up for other counterparty risks I didn't avoid.
So it seems like the population of HN has both a bunch of boosters who will blindly upvote plausible-sounding “everything is fine” positions but also a bunch of better-informed people who will do the work in tearing those boosters down.
They're willfully blind, and just like Elon, there's always somebody willing to parrot whatever they think Master wants them to say
> Maybe your cryptocurrency is different. But look: you’re in really poor company. When you’re the only honest person in the room, maybe you should be in a different room. It is impossible to trust you. Every comment online about cryptocurrency is tainted by the fact that the commenter has probably invested thousands of dollars into a Ponzi scheme and is depending on your agreement to make their money back.
[1] https://drewdevault.com/2021/04/26/Cryptocurrency-is-a-disas...
They’re fully aware and will tell me it’s shady, and yet, do it anyways.
Absolutely, someone needs to fund the 100/1000x Ponzi returns that they want.
The goal is now just to HODL till some mythical event where they'll be millionaires/billionaires with a single coin and then just use that as collateral to buy stuff through defi. Very similar to the GME cult.
> If the liabilities are collateralized by assets on their balance sheet, then the financial risk is not to Alameda but the lender!
Turns out the lender, illegally, was FTX
Kindleberger likened financial frauds to underwater obstacles. When money is plentiful, the metaphorical tide is high, and the obstacles are hidden by the water so nobody sees them. But they're always there. Then, when the tide recedes (cheap money ends), the obstacles are exposed for all to see.
Binance is just going to be the last domino to fall as a result of cheap money ending.
They'll pay out people from the US first for sure, but that's just how the bankruptcy process works and there likely won't be anything left by the time the queue moved down to foreign holders. But the reason you've provided is just plain fake news
Apparently there was special rules for Japan. The regulations were a result of Mt Gox failing. Basically you cant comingle funds and the accounts need to be linked to a trusted third party.
https://www.coindesk.com/consensus-magazine/2022/12/13/japan...
Even what? Really?
My impression from Ray's congressional testimony was "FTX.us might be solvent, but we don't know yet because the forensic accountants are still chipping away". But I was only half focused and am not confident I remember correctly.
The gist of what was said, is that a lawmaker cited something about FTX.US being "98% solvent" and asked John for confirmation of this. John stated that he couldn't give any figures at the moment, but there was generally truth to the statement that U.S. customers would be hurt less than others.
Here's an article that touches on it.
https://www.bloomberg.com/news/articles/2022-12-13/ftx-s-us-...
Entire financial space. It's just that traditional financial companies are better regulated (and are better at working within the regulations to hide their crimes). But they are not in any way better humans. For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous.
The dark side of the force with them.
This is true: it is about making money, after all. Greed is a good thing.
Edit: I've recently seen a significant reduction of blatant crypto shilling posts from people like that on this forum (thanks to good moderation, and people calling them out on their lies, and linking to proof of their scams and well documented history of crimes).
For example, it's been ages since I've seen any posts here from the notorious scammer and spammer Richard "Dodge Dodge" Heart (whose real name is Richard J "Spam King" Schueler, winner of the "Golden Pump Award" for "Best New Scam" for his POS get-rich-quick pyramid scheme called "HEX"). He was trying to recruit and exploit unsuspecting developers here on HN to implement and operate his scams in exchange for promises of shitcoin equity.
https://bitcoin-takeover.com/deconstructing-richard-hearts-l...
https://learn.bybit.com/defi/what-is-hex-crypto/
https://protos.com/richard-hearts-curious-launch-of-hex-puls...
Yes, plenty of people got hurt because they made shitty investments.
How many people got hurt due to their bank running off with their money to the Bahamas/betting it all on red?
Because that's the degree of 'hurt' that the various crypto exchanges have been inflicting on their customers. Can you find me one American who lost money from their savings account in 2008? Or just had it go poof from their stock brokerage?
"Almost crashed" is not the same as "crashed". 2008 Was a stress test and the system survived.
The only reason we didn't have bank runs and frozen accounts is because the Fed stepped in to provide liquidity to the whole market. The banking system would've collapsed similar to the Great Depression without such action. Lots of people lost their savings in the Great Depression.
Retail investors used FTX, retail was not heavily exposed to Bernie. His marks were mostly institutional and accredited investors, for whom the expectations are far closer to the 'buyer-beware' side of the spectrum.
> because the Fed stepped in to provide liquidity to the whole market.
That's the Fed's job. Everything worked... Pretty much as intended.
And there's a reason it's not stepping in to provide liquidity for the various crypto scams. Liquidity injections can save a situation where value exists, but can't be immediately realized - as in the case of a bank run. In this case, though, there's no value worth saving.
> Lots of people lost their savings in the Great Depression.
Which is precisely why we built systems to prevent that failure mode from happening again. They worked.
I wrote a longer comment a year ago but here's a piece: "The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times?
When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2). If you're comparing prices in dollars, it feels like education got really expensive compared to the basket of goods the BEA tracks but in reality, education requires less gold than it did in 1970. Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation but when you look at things that can't get much cheaper like housing, healthcare, education, asset prices of all sorts, you can't miss the fact that they correlate more closely with gold than the USD."
(1) https://news.ycombinator.com/threads?id=dumbfoundded&next=29...
The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
> When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2).
The same amount of education isn't actually 30x more expensive.
Because you're not getting the same services in exchange for your money today, as you were 50 years ago.
If you drop the money-pit sports programs, the entirety of the administrative sector, the nice new dorm buildings, and account for reduction in public funding, you'll find that the growth in the cost of education is much closer to the cost of inflation.
It's not all that expensive, even in 2022, to stuff a group of young adults into a lecture hall and have an underpaid adjunct who doesn't even get health insurance read off Powerpoint slides to them for 15 hours a week. It's the everything else, most of which has nothing to do with education that costs money.
[1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, NFTs, shitcoins, etc.
> The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
How are you measuring it? It's a circular argument if you measure it in dollars. If it measure it in anything that can't be made more efficient due to automation & offshoring, it's no where near a 7x decrease.
> [1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, etc.
Gold is simply a good that's impossible to mass produce with technology. Use land, housing, healthcare, education or whatever you feel is most representative. Using toothpaste and tv's for CPI is a bad measurement in the last 50 years, our technology for mass producing them has lowered the true cost.
(1) https://educationdata.org/average-cost-of-college-by-year
(2) https://www.in2013dollars.com/Medical-care/price-inflation
(3) https://fred.stlouisfed.org/series/ASPUS
(4) https://www.statista.com/statistics/196400/average-value-of-...
Measure it in houses built, cars sold, concrete poured, steel refined, restaurant visits, number of people working in service industries. Measure it in color televisions and washing machines and computers sold and movies made, and the mountains of disposable crap that everyone fills their homes with. Or by looking at the skyline in Beijing in 1970, and today. The dollar is the currency of global trade, you have to print more of it to keep track with the global economy, just to prevent it from becoming a deflationary currency.
It may not less obvious if you live in the United States, but we make and consume more useful goods and services, much faster than we mine gold. That's why the cost of an ounce of gold can grow 50 times, while the cost of a loaf of bread can grow 5 times in the past 50 years.
> If it measure it in anything that can't be made more efficient due to automation & offshoring, it's no where near a 7x decrease.
Why not? The world's economy has grown by around that much in real value (Denominated in goods[1], not dollars) added in 50 years. [2]
> Use land, housing, healthcare, education or whatever you feel is most representative.
Land is speculative, you don't make more of it when the economy grows, and its price trends towards 1 divided by the interest rate. In a world of zero-interest, it trends towards infinity. A modern house requires a lot more economic inputs to go into it than a 1970s house. Likewise, the amount of waste and work that goes into healthcare, education, etc, has significantly increased over that same time period.
A better metric would be median wages[3], compared to productivity growth. Median family income in the US in 1970 was $9,870/year. Median family income today is ~$78,000. If there was zero productivity gain, and zero quality-of-life increases/decreases, this will tell us that a dollar today is worth ~8x less than a dollar back then.
But we have had productivity and quality of life increases. And you have to divide that 8x by whatever those multipliers were.
Gold is the weird outlier when it comes to the value of things, not the gold standard.
[1] 50 years ago, there were 200 million cars in the world. Today, there are ~1.4 billion. You can't tell me that the real product of the economy hasn't grown by something resembling that factor. Or that billions of people haven't been born, without economic growth. Or that billions of people haven't been lifted out of complete poverty, without real, per-capita economic growth.
[2] It's grown about 35x, when denominated in dollars. If we actually used gold for money, it would have been deflationary, to the tune of... Whatever real economic growth the world would have had. That amount of deflation would have been utterly horrifying.
[3] At the end of the day, the costs of all things are largely determined by wages. Plus a bit of profit margin for speculators, rentiers, and capitalists, but they take a much smaller slice of the pie.
Of course it is not publicly-traded, so that eliminates one source of pressure to be a wretched hive of scum and villainy.
Of particular note is that they are the largest bank in the United States to not require or take a bailout during the financial crisis.
I imagine credit unions have the same lack of pressure that my bank does and it is incomprehensible to me that someone would patronize a financial institution that has incentives to screw them over to make their quarterly report look good.
It is entirely possible to interface with the financial system without dealing with scumbags, or putting your faith into digital magic beans that immediately collapse when the Ponzi stops.
Oops, correction.
FTX, Coinbase and Kraken definitely aren't "a wretched hive of scum and villainy".
Dont worry, I have it right this time ...
Coinbase and Kraken definitely aren't "a wretched hive of scum and villainy".
https://www.investopedia.com/articles/00/100900.asp
Theres another fun one from an NYSE stock ...
In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards. However, the company was really shipping fruit baskets to customers. The employees then created fake documents as evidence that they were recording sales.
High likelihood we view these two similarly in the near future.
And you may say that Madoff Securities didn't start out as a Ponzi scheme, federal investigators believe that it took until the 70s for it to start. Madoff claims the scams didn't start until the 90s.
So, "being around forever" isn't evidence of lack of fraud.
So the fact that Coinbase is entirely US based is also not a guarantee that it's not doing shady things.
And the implication DonHopkins was making is that every major actor in the crypto space is run by scam artists trying to defraud people of their money. There are no good actors.
It's not about the level of risk with regards to the structure of the company. It's about the people running it. And no manner of corporate structure is going to prevent people from simply lying. Which is what every fraud has to do at some point. By their very nature.
DonHopkins is saying since we can't trust the people running these companies, we can't trust these companies.
And the fact that they've been around for a while or are based solely in the US mean nothing when one of the largest financial scams ticked both of those boxes.
Forever? So dry behind the ears, are you?
>born out of the collapse of MtGox
The apple far from the tree falls, say you?
>very surprised
Not Jack's complete lack of what, are you?
> Be kind. Don't be snarky.
Coinbase also always had exorbitant fees compared to other exchanges (but who's looking "smart" now, those who paid the huge fees at Coinbase or those who were paying 0.000001% / operation at FTX and are now fucked?), which at least make it sound like making money on actual fees was their business model.
Now: Coinbase is leaking money by having revenues which fell and running costs through the roof.
But, in the short term, if FTX is gone and if Binance goes, Coinbase becomes number one. They're already number two and it's very likely that Coinbase's volume is real (contrarily to Binance).
Coinbase is a HN unicorn, US incorporated. The people behind it are known.
They may be behind a huge scam but somehow I don't think so.
Also I do really wonder: now that rates have gone up, they've got $53 bn actual USD bringing it a significant amount of money. Where's that money going? For a start they're not giving the yeld to people storing USDC in their own private wallet in a "your key / your coins" style. What about the USDC held at Coinbase for customers? Do they give yeld on that?
$53 bn or so is a lot of money with 4 to 5% yeld or something...
Doesn't the other poster's claim that the "Entire financial space" is corrupt and that "For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous" undermine the claim that BNY Mellon is trustworthy?
I agree that USAA is a rare exception, but do you really trust BNY Mellon if the "Entire financial space" is corrupt, or is that just whataboutism that ignores the outrageously unprecedented and shill-droid-automated degree of unregulated untraceable corruption in the crypto space?
If you believe Coinbase is as rare and trustworthy an exception as USAA, then I've got some Trump NFT's to sell you!
There could be a similar arrangement where US pairs don’t appear on the intentional exchange and vice versa, even if they use the same infra
Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were).
This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...
Quoting the article:
>Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators.
So yes, Binance.US was created to give the impression of a separate business entity to appease US regulators and entice US investors. But it appears to all be a shell game. Deposited funds may as well have been deposited directly into Binance, which is against the public perception they created.
What is unclear to me is what independence is promised. Did they promise a fully segregated business with no links? If TFA is right then this is violated.
But maybe they just promised a US entity for dealing with international Binance. If so, the only benefits you reap is there is a US business you can sue and some kind of financial supervision - quite light by the sound of it. And not, by itself, unheard of in regulated finance.
Just saying "look money flowing to and fro" contradicts some but not all sane definitions of "independent".
While definitions can have nuance, the "fully" prefix is worthy of consideration here. That doesn't seem to lend itself to being an accurate description of a shell exchange.
If you're concerned the "fully" part didn't come from CZ:
>For instance, Binance.com is not available to US users, while there is a brand partnership with Binance.US, which is a fully independent entity that is a compliant and regulated exchange in the US, to provide US users with a safe, secure, and compliant trading platform. [1]
This is pretty clearly saying one thing then doing another.
[1]: https://www.binance.com/en/blog/from-cz/a-letter-from-our-ce...
I'm not saying Binance did nothing wrong, only the article does not elaborate what promise of independence is made.
These statements, while certainly very strongly hinting at total separation, are vague enough that they could mean anything.
Clearly, the powerhouse of transparency that is Binance could just cut all such speculation by providing a proper audit. We're all arguing around the margins of a slightly dog-chewed napkin containing scribbles pinky promising Binance is good for the money...
Additionally, the "broker/dealer" function wallets and bank accounts should be separate, preferably in separate corporate identities, from the "free lunch and buy a castle" corporate accounts.
This is how I would set it up, but wtf would I know.
Then same level of fake "outrage" and (at best) ignorance applies to the rest of the article.
There really SHOULD be a requirement for centralised exchanges to hold coins (in wallets they alone control etc) equal to customer deposits (with a reasonable get out for USD/USDT/USDC/BUSD etc fungibility). But there isn't. So Binance.US is free to hold them or transfer them to Binance. And given the terrible service offered by US banks, it is not surprising that they have to use Binance(main)'s rail to access payments. In fact it's totally standard.
The thing I most frequently come across is companies that more or less outright admit that without tracking their users they can not make the numbers work or that they refuse to abide by the law and so they block EU citizens outright.
It is like Vanguard sending your money to their hypothetical Chinese subsidiary because that is where they think the market is most efficient. Then when the Chinese government seizes that company's accounts, you are shit out of luck because your money is not where it is supposed to be, and the US entity is bankrupt.
If someone deposits cash, don't offer any interest. Keep it as cash (or something backed by the US dollar).
I can give Vanguard USD 5000 and feel safe thinking I can buy VTSAX anytime.
This is all these exchanges need to do. Just execute lots of trades and you will make a few pennies every time.
Why is it so difficult?
SBF laid out in detail how crypto exchanges actually make money back in an April interview:
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
>https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
"exchange" is mentioned exactly zero times in the article. However, I'll let that slide as presumably you meant to imply that exchanges make money through yield farming, which also doesn't make sense because yield farming doesn't involve the participation of exchanges at all. As mentioned in the article, the concept is that a smart contract accepts deposits and hands out tokens, which constitute the yield. No part of that requires exchanges.
> The (FTX) crypto exchange's revenue soared more than 1,000% from $89 million to $1.02 billion in 2021.
To answer GPs question, legit exchanges do spend a lot of money and effort on keeping user's assets secure so it's maybe not as easy as it seems. But in the case of FTX, I totally agree. FTX was like 2nd or 3rd highest volume exchange and could have been a highly profitable business on it's own. Only SBF knows the answer to why that wasn't enough.
It's hard to compete in a market where big, scummy brokers will ask no transaction fees because they use their customers' assets to speculate and profit. Had they switched tactics to a transaction fee based approach, they'd risk large customers taking their assets to another broker, which can cause insolvency problems to become visible. Switching business models after having your shady business model collapse may not be an option!
I think you can make a decent amount of profit in the cryptocurrency market by just doing the thing that's normal for real brokers, but you'll need quite soms scale to become seriously profitable. You'll also need to prove somehow that your nee company is the real deal unlike all of your shady competitors.
There are probably real exchanges out there, completely solvent and doing honest trades, but without large volumes you'll probably never hear of them. The most risky businesses will make the most money, provide the cheapest service, and get most of the attention, at the risk of collapsing and taking the price of their speculative assets down with them.
https://www.macrotrends.net/stocks/charts/COIN/coinbase-glob...
Why would you base any crypto predictions on previous cycles? Has the crypto market ever experienced a cycle with high inflation and rising interest rates?
Well while you are deciding if you are going to buy something with your 5k or not, I, a gigabrain genius, can take your 5k and buy the latest mooning stable dog coin and turn it into 50k gaurantteeed and when you want to buy your shares sell it for massive gainz and keep the 45k I made for myself.
“To be clear, your brokerage firm cannot lend out your stocks without your permission. However, you may have signed a customer agreement that explicitly allows your broker to lend out your securities. This clause is often tucked deep within the customer agreement, and few investors pay much attention to it.”
Thats what they are alleging here, and why the supposedly seperate company is just a trick.
> Binance.US was described as a separate entity from Binance that was merely licensing the name and certain features from the main company.
> In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.” In reality, Zhao controlled Binance.US, directing its management from abroad, according to regulatory filings from 2020, company messages and interviews with former team members. An adviser, in a message to Binance executives, described the U.S. exchange as a “de facto subsidiary.”
> These public issues have led many to wonder whether Binance and Binance.US are truly separate entities. We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets. Further, we demonstrate that trades allegedly happening on Binance.US’s exchange are likely being conducted directly on the main Binance exchange.
> It turned out that Binance US apparently didn’t have enough USDT in its wallets to pay back customers for several hours.
> However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange! We must ask, why were U.S. customer assets held in Binance addresses?
> We conclude that a significant portion of Binance.US customer deposits are commingled with other deposits on Binance’s main exchange.
> Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators.
> In reality, Binance.US appears to be little more than a facade to obfuscate the fact that an unregulated offshore crypto business currently under investigation for money laundering and sanctions violations is doing business in the United States despite being banned from the country.
The post explains quite clearly why they call it a trick.
If I use Vanguard in the US, it is a completely separate entity from Vanguard in Europe. This is to ensure they meet the regulations of where they're operating. This is standard operating procedure. What Binance is doing is not.
If the EU citizens data is sneakily transferred out of jurisdiction and used without consent it's a trick and illegal by the GDPR.
We haven't even hit the real recession in the broader economy yet.
An independent entity operating as an exchange might do market making activities with many other exchanges. It seems Binance.US only does that with Binance.
An independent entity operating as an exchange should be directly responsible for and in possession of customer funds that have been deposited with them. Binance.US couldn't fulfill withdrawals without Binance's help. That should not ever be necessary if these are separate entities.
* all exchanges transfer a lot back and forth on behalf of their clients. Arb desks, market makers, etc. To conclude commingling is laughable.
* binance international has many different products and clientele (much more retail and people with positions) than binance us (mostly just hfts, little real world traction). No surprise that the turnover to assets is different. It doesn’t mean that trades awe executing in binance international instead of US.
* binance saying some market makers have headquarters outside the US does not mean binance us trades actually happen on binance. This is so horribly, terribly wrong it makes me doubt the article is good faith.
* A market maker isn’t a pair of address that move funds back and forth, unlike the article claims.
The claim doesn’t even make sense. Binance US trades hundreds of millions a day, and the lifetime back but forth transfer is under 2 billion??? That doesn’t add up to “binance us does it’s trades in binance international”.
The claim doesn’t even make sense. There’s no reason to send funds over to binance international, do the trade for each party there, and send funds back. If the claim is that a market making firm does so then, yeah sure, many do, so what? That’s literally how cross exchange arb works, “but in the low one and sell on the high one”.
Let’s keep the content of a respectable quality. This is someone putting out some garbage so if binance does collapse, they can claim they called it ahead of time.
As part of an effort to offer digital asset trading technology to its customers through the Binance.US platform, BAM Trading entered into licensing agreements with Binance Holdings Limited ("Binance"), which operates the world’s largest digital asset exchange. BAM Trading and Binance share common majority ownership, but are not within the same corporate structure.
The article is exactly right afaict.
“ nobody knows what the liabilities are. At one extreme, if the liabilities are all cash, alameda is in a dire place. At the other, if the liabilities are just the tokens on their balance sheet, there's nothing particularly interesting. “
Is obviously not a total dismissal - I’m on mobile so can’t scroll around to find my other one but it largely says the same thing.
Also, if you can’t really imply anything other than “I’m a shill because I said the balance sheet wasn’t certain evidence of insolvency”, what’s the point? Shill accusations are explicitly called out by dang and the rules for this reason
They also brought attention to Celsius two months ahead of their collapse. [2]
A lot of crypto ponzi schemes have been covered up with "Oh, that was just us doing arbitrage."
Celsius founder in 2020:
"We lend financial assets to players that can transact and generate income for themselves through arbitrage, market making or shorting certain stocks or digital assets."
Almost every brilliant arbitrage has blown up in the faces of high-risk entities or never happened to begin with (SBF's Japanese arbitrage trade looking pretty suspicious right now, with a $9B hole in his balance sheet).
The confidence of your remarks also strikes me as strange, seeing as we've now experienced one domino after another of "we're perfectly solvent and not doing anything bad" to "we're closing withdrawals and all the money's gone" (LUNA/UST, Celsius, 3AC, Voyager Digital, BlockFi, Genesis, FTX... all just in the last year.)
How can you have so much confidence these trades aren't suspicious?
[0] https://dirtybubblemedia.substack.com/p/ftxed-the-tangled-ti... [1] https://dirtybubblemedia.substack.com/p/is-alameda-research-... [2] https://dirtybubblemedia.substack.com/p/celsius-networks-uns...
2. If Binance goes under, what happens to the holdings of Binance.US customers if they are depending on transactions debited from Binance? It's not about clientele, it's about where the assets are parked.
3. You have the article's causality chain backwards. They establish the hypothesis first and then note that offshore market-making (noted in the Binance.US TOS) supports the hypothesis.
4. The article puts "market maker" in quotation marks, implying that it's not a real market maker but rather a vehicle to move funds to the other entity for the purpose of effecting trades. I interpret this as a no-arbitrage condition between the Binance and Binance.US.
5. The amount of money is irrelevant. If your assets are deposited in a regulated entity and then they get transferred to an unregulated entity for any reason aside from clearing your own transactions, something strange is going on.
6. Cross-exchange arb shouldn't result in USDT deposits on Binance.US dropping to six figures and then needing a $10M lifeline from Binance.
7. This "someone" as you put it was fairly prescient with regard to Alameda and FTX, using similar methodology, and faced similar criticism for the four or five days between their publication and the collapse of the FTX empire.