Binance sees $2B in outflows as troubles compound | Hacker News Reader

Binance sees $2B in outflows as troubles compound

wsj.com

419 pointsdanso376 comments

Hopefully Binance still has all the money customers deposited and didn't lose it or trade it for magic beans like FTX did.

If a lot of customers take out their money and Binance goes out of business, that's fine. I mean, it sucks for Binance, but they are kinda shady and the world might be better off without them. If customers find out their deposits don't exist anymore, that's definitely not fine.

> didn't lose it or trade it for magic beans like FTX did.

Is anyone taking bets?

If you have funds in Binance, you've made a bet. If you don't you've made a different bet.

Are there any derivatives on this I could place my bet on?

I'm looking for some bet derivative backed securities. You know they're good because security is in the name!

It's really hard to place trades like this because there's so much counterparty risk and contagion from something like Binance collapsing is likely to make your ability to cash in on your bet difficult.

You should do your own research but there's something called BUSD.

They’re a shady crypto exchange (is there any other kind?) that’s been banned in a tonne of countries around the world for flaunting financial regulations. If there’s a major run on Binance, I’d be shocked if depositors get their deposits back.

> is there any other kind?

Yes. Kraken.

> regular Proof of Reserves audits make it easy for clients to verify the balances they hold are backed by real assets, all with just a few easy clicks in their account.

https://www.kraken.com/proof-of-reserves

Proof of Reserves means nothing without liability. You can have reserves of 100 billion but your liability is 200 billion.

> Proof of Reserves means nothing without liability

Kraken knows this.

> Kraken voluntarily conducted the industry’s first Proof of Reserves audit and set a legitimate standard by accounting for not only our crypto balances, but also our client liabilities under the supervision of an independent auditor.

https://blog.kraken.com/post/16592/proof-of-reserves-or-proo...

So where is Kraken's liabilities audit from a reputable firm? Please no no-name firms.

I'm definitely in the "crypto is silly and a drag on the world" camp, but this is actually not a reasonable request.

The big 4 accounting firms have all stated they won't take on more crypto audits. So have like the next 20 :)

That is true whether you're trying to do it right or not (IE It is independent of whether you are in the 0.1% of this stuff that is not a scam).

It's not reasonable to ask them to do something impossible, and then point out that they can't do it as proof of fraud. That's true even if it's impossible because of worries about fraud :)

It's instead reasonable to ask them to do what they can.

IE "Prove you aren't fraudulent by getting the big 4 to audit your liabilities" - "The big 4 won't take on more crypto audits due to worry about fraudulent companies and their own reputation" - "See, you are fraudulent!"

Does not work as an argument.

They’ve only stated that because it’s not obvious there are any big legit crypto companies. If kraken looked fully above board, the big 4 accounting companies would be willing to take it on as a client.

I don't like crypto and I don't fully buy the Kraken audits, but man, are the Big 4 also full of s**. I wouldn't say any legit (if such exists) crypto firm can do anything to be taken on as a client at this point.

Which is ironic because the Big 4 are not known for aggressive auditing. There have been plenty of cases in trad-fi where a positive audit was followed by collapse, and sometimes evidence of criminality.

> There have been plenty of cases in trad-fi where a positive audit was followed by collapse, and sometimes evidence of criminality.

I mean, audits should trigger a collapse... I assume once people inside realize the audit passed, they'll be more blatant and likely to blow up their scheme.

Sure but it changes nothing, as I said. Assume 99.9% of companies are fraudulent and that’s why they won’t do audits. You can’t say the 0.1% are fraudulent because they can’t get them to break their policy. You can only ask them to do what they can do.

Deloitte audits coinbase [0] and e&y audits at least one crypto company.

So they haven’t sworn off crypto as an entire industry, they just won’t audit shady firms. And specifically binance has not been able to convince a major firm to audit them.

Also, it’s not that these crypto companies aren’t hiring big4, it’s that big4 won’t attest to reserves and other accounting standards. So it’s quite likely that crypto companies are attempting to hire, big4 do due diligence, detect shenanigans and refuse.

[0] https://blockworks.co/news/crypto-auditors-call-it-quits

Your last paragraph is basically assumption of guilt. I don’t think you can make the claim that they are just saying no to the shady ones without more data. Especially since they say yes to plenty of shady things

It seems a lot more likely to me they were threatened by regulators or scared of what they would do, and created blanket policies about new clients or what they would attest to as a result than “we are doing diligence on tons of crypto firms that want us as clients and just saying no after we discover they are shady”

Why would you assume they have a blanket policy?

It’s much more likely that the big4, who have been doing the same thing for 100+ years, just applies their normal system when evaluating new clients- what is their ability to perform the work, what is their risk to the firm.

The fact is that they haven’t been audited. Financial regulation is set up so you don’t have to speculate or assume why this doesn’t occur. If it doesn’t occur, that’s bad from a risk mitigation standpoint.

Since crypto firms are logical entities that know the benefits of auditing and they have lots of funding and can afford it, it seems more likely that they don’t audit because they have bad books.

The threat to accounting firms by regulators is that if they audit incorrectly and attest to incorrect things then they will be shut down.

This is incorrect, Deloitte audited Coinbase just last year.

How is that inconsistent with “won’t take on more clients”. Also in the very articles we are discussing you can see the big four were asked by others and said no. If Kraken asked and made public they said no would that satisfy you?

> won't take on more crypto audits

is different from “won’t take on more clients”.

It works perfectly as an argument. If you can't convince the companies who are in the business of auditing to audit you, it's entirely reasonable to think "maybe that points to systemic issues in this business model". And we're talking about firms that are routinely willing to audit and look the other way and sign off on all sorts of obviously shady practices.

Reputable firms will not touch anything related to crypto. They are not allowed to.

They are and they have. Many stopped after FTX as a policy. Poor risk/reward tradeoffs.

> So where is Kraken's liabilities audit from a reputable firm? Please no no-name firms.

There is no such thing as reputable audit firm. They will do whatever audited firm wants because they want to get paid for more audits.

Sure, if the firm is willing to put their entire reputation on the line to get more of your business. KPMG, PwC, Deloitte, and E&Y are very unlikely to destroy their reputation for your little business.

> Kraken knows this.

Clearly, because they won't attest to liabilities (IE, how much money do they owe in total), but "client liabilities" (IE, how much money do they owe to their customers).

If they took out a loan for 100M, with their client's assets as collateral, that won't be covered by "client liabilities", but it sure as hell will be a problem when that loan gets called in.

Looks to me that is not so different from 'normal' banks

Except "normal" banks are regulated with a history of regulation going back for more than a century.

And as we know this system has been working perfectly.

No deposits were lost, the FDIC even extended the insurance to be above the pre agreed limit.

Certainly not perfectly, but compared to the chaos that is the world of crypto, positively mundane and peaceful.

Regulate crypto exchanges then. They're just banks in disguise.

Why do you want crypto regulated? I thought the goal of crypto is to free you from regulation and government control.

If crypto is regulated, your crypto can be seized, frozen, held, and so on.. Why regulate it?

The state already has the power to seize, freeze, or hold crypto. That has nothing to do with regulation.

Yeah, but the Wild West nature of crypto is its selling point, maybe even its raison d'etre. What would be the point in regulated crypto? It won't do anything that the traditional banking system doesn't already do.

Well your basic assumption was already wrong, what else do you want me to tell you? That people don't personally care whether or not cyrpto's selling point remains viable? as if anyone should

I want cryptocurrency exchanges regulated. Not cryptocurrencies themselves. They are distinct. Cryptocurrencies are perfectly good technology, exchanges are fractional reserve banks in disguise.

Normal banks undergo regular audits, and get seized by the government when there's a wiff of insolvency about them.

disclaimer: no relation

Not to distract, as these are all valid concerns, but why on earth is anyone leaving anything on an exchange for longer than it takes for the deposit, transaction, and withdrawal to clear.

possibly so they can engage in other transactions with other users of the same platform without waiting for half an hour

(lightning or ethereum would also solve this problem, but binance has more users despite being a company instead of a protocol)

To save on transaction fees perhaps, or to because they don't want to run the risk of looking after their own keys.

Because they might have to pay taxes on it.

> why on earth is anyone leaving anything on an exchange for longer than it takes for the deposit, transaction, and withdrawal to clear.

I've never advised my dad to take his crypto off of Coinbase, and he's been keeping it there safely for about six years at this point. It's the best place for him to keep it, for better or worse. I'm not there to transfer everything to a ledger as he trades, and I also don't really want to take responsibility for all of his funds anyway. If he started trading on Binance US (not gonna happen) then I would probably just tell him to send it to Coinbase. I don't keep my crypto on exchanges, but for a lot of people, it really is better than the alternatives.

Because they are day-trading, and if everyone stopped day-trading, all of these exchanges would collapse overnight. They can't sustain themselves off people buying coins once a year.

That's cool of them, let's hope that is never put to the test. Let's see where this Binance thing goes as well.

I would say Coinbase, which is on the stock exchange, and is highly regulated just because of that.

Kraken as well. They don’t play the game other exchanges such as Binance play and are happy to function just an ordinary simple exchange. However it’s difficult to know since they are not a public company and proof of reserves means nothing without knowing how much debt the exchange has.

I don’t want to defend Binance. They are shady and they deserve to go down, but there is no week that goes buy that the USA does not sue anybody or closes a crypto friendly bank such as Signature. Off ramps are all crippled. The European Parliament wants to limit the amount you can deposit to a private wallet. It’s non stop to the point I personally laugh every time.

All this feels to me like a coordinated non stop attack and it already has a code name, operation chokepoint 2.0

In all fairness I wish HN was a bit more friendly to crypto specially to Ethereum which has switched to a more ecologically friendly model, that is innovating in regard to zk proofs… Specially in a month that Shanghai upgrade launches, and the probability that the SEC fills a lawsuit against the Ethereum Foundation will exponentially grow.

> "I wish HN was a bit more friendly to crypto specially to Ethereum which has switched to a more ecologically friendly model"

"Why are you so upset now that you found out I'm stealing grandma's savings? Don't you know I stopped beating my wife already. Also I'm doing much less meth these days. A man don't get no respect around here." -- crypto, the deadbeat cousin of actual tech.

How exactly is eth stealing anything from anyone?

It's primarily a Ponzi Construction Kit.

Best description of eth I've read

Source?

https://www.coindesk.com/learn/minting-your-first-nft-a-begi...

Interesting! An artist creating, minting, and selling an NFT is a pretty solid point against the accusation made.

A Ponzi scheme has a specific definition. Despite what HN seems to think, it is not shorthand for "crypto thing I don't like/understand".

Citation needed on the "selling" part.

https://www.merriam-webster.com/dictionary/Ponzi%20scheme

Here's the common definition of a Ponzi scheme. While people can debate whether any specific coin or nft built on etherium is a Ponzi scheme, it'd be hard to argue that there aren't plenty of examples.

Etherium makes it easy to spin up a new "coin" or token, the article is a prime example.

Exactly, this list of Ponzi Scheme red flags is from Investor.gov[1]. While certain aspects of the crypto ecosystem may fall under these red flags, most don't, or don't apply to the coins/blockchains themselves.

> Many Ponzi schemes share common characteristics. Look for these warning signs:

> High returns with little or no risk.

Some new shit coins and many NFT projects absolutely make these bullshit claims, but it's well, well known that there's risk by speculating in crypto at this point. We've all seen multiple 80% drops in bitcoin's price (or you can with a simple look at the 5-10 year chart). It's no secret. People speculate in it anyway for other reasons.

> Overly consistent returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.

Except for maybe stablecoins (which we found out this past year aren't exactly stable), no crypto coin can claim to have consistent returns.

> Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators.

This part is true for many crypto coins, and the SEC is going after them now. Bitcoin itself seems to be immune to this by having no centralized component to it, which is unlike most other coins.

> Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered.

Most exchanges are either licensed and registered if they operate in the US, hence their KYC measures.

> Secretive, complex strategies.

Yeah, some algorithmic stablecoins are like this (at least the complex part), and you've seen most of them collapse at this point. The rest are pretty simple coins for the most part, and many of them have completely open source code, so there's nothing secretive about it at all.

> Issues with paperwork. Account statement errors may be a sign that funds are not being invested as promised.

You can't really have an account statement error on the blockchain outside of a 51% attack (which is arguably not an error, just creating a new consensus), although some of the companies that have sprung up around it add obfuscation that can lead to possible account errors. Banks can have account errors as well, though.

> Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out.

This one can happen at exchanges, but the blockchains themselves still work and you can transfer with others directly, assuming you have taken your crypto off of exchanges ("Not your keys, not your crypto" as the saying goes).

[1]: https://www.investor.gov/protect-your-investments/fraud/type...

I really like the idea of going through the list of common warning signs for a Ponzi scheme and still having to weasel around like "well technically if you squint, this one doesn't apply to every cryptocurrency."

Unfortunately cryptocurrency and NFTs fit exactly the definition of a Ponzi scheme and it's quite easy to see why:

> Pon·zi scheme

> noun

> a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

Literally the entire basis of deflationary speculative "currency" is a Ponzi scheme. It has no value if new people don't buy in.

"It has no value if new people don't buy in." is a statement that evaluates to true for any currency ever minted. You also ignore the "nonexistent enterprise" bit.

> You also ignore the "nonexistent enterprise" bit.

What is the enterprise? Cryptocurrencies themselves have no governance or accountability. They don't have any responsibility to continue to exist beyond the efforts of the participants that are propping them up. This is evidenced by the massive number of rug-pulls that constantly happen in crypto.

> is a statement that evaluates to true for any currency ever minted.

Except not really. Let's talk about USD. If there were no new participants introduced to United States currency at this point it doesn't become valueless because it is not a deflationary speculative currency. It exists as an agreed upon representation of value, it doesn't need to continue to consume new participants to justify its valuation, or continue to exist.

Let me ask you, is there a good or common reason to buy etherium today besides hoping that it increases in value? How would it increase in value if no new people were introduced to the system? How does crypto justify its existence in any way beyond convincing the next biggest sucker to buy in? Bonus points if you don't mention stocks.

> Let me ask you, is there a good or common reason to buy etherium today besides hoping that it increases in value?

A classic use case is engaging in commerce (whether it's with ETH, DAI, USDC, etc), without needing to trust a middleman like PayPal to not freeze or steal your funds. For this one needs ETH to pay gas.

Primarily, the problem with that is I don't know anywhere that I would choose to spend money that also takes ETH. I also don't really think that what you're describing is good or common.

Common: The middleman is still there in the most common case since most wallets are custodial. There are a ton of recent examples of exchanges freezing accounts, including the very article that we're commenting under, so I don't really get what you're talking about.

Good: It doesn't make sense to use a wildly volatile deflationary token as currency. Deflation discourages spending which is why there is no real currency that restricts the supply of money to a fixed amount, because it encourages hoarding.

> most wallets are custodial

I wouldn't argue that everyone should self-custody. If many users have access to convenient custodians who they can trust not to steal their funds, that's great; it's just that not everyone does.

I don't really have a stance on Eth's monetary policy, I was just trying to address your point about a use case.

An NFT is yet another pointless digital construct that foolish people paid huge sums for. It's like selling a jpeg that is publicly available. "In this spreadsheet a jpeg named foobar with this hashed value is owned by Fred Johnson" - this is creating something useful?

A jpeg of the Mona Lisa is also publicly available, but even if I created a replica with identical brushwork, it wouldn't be worth much compared to the one in the Louvre. Would you also call original paintings a Ponzi?

No, but those are physical objects. Your certified original jpeg (nft) is not worth anything really if everyone else can just find the jpeg on the internet. NFTs are just silly, another reason being that they are separate from copyright ownership of the image.

I don't think the physical object is really relevant. Imagine we all had robotic painters in our garages, which given $1 of materials, could precisely replicate any brushwork from some images.

Surely that wouldn't destroy the value of famous originals? Because their value is based on provenance, not the physical difficulty of (re)creation. NFTs are the same - replicating a JPEG is trivial, but the replica won't have the same provenance.

And yet, SoundCloud and the iTunes Music Store and many other such sellers of trivially duplicatable bits of data exist and are successful. And yes, those bits of data are easy to find for free online.

You can just say you don't understand the appeal, that is a perfectly valid opinion.

According to you.

> The European Parliament wants to limit the amount you can deposit to a private wallet.

What? Source.

How do they plan on enforcing this?

> How do they plan on enforcing this?

Tyranny. People make technology to get around their idiotic laws and control. Suddenly they must become more tyrannical than they were before just to maintain the same control they previously enjoyed. We'll either end up with anarchy enabled by subversive technology or totalitarian governments that regulate everything their citizens do online.

That answer is rather light on specifics.

AML/KYC is just the financial arm of global mass surveillance. They can just trace your withdrawals from an exchange. If you're not mining crypto, you're done.

Well you can always exchange it peer to peer, without a third-party (exchange/payment processor/etc.) as it is initially meant to be used, but it's true that mining rewards are generally the most anonymous way to acquire it.

> you can always exchange it peer to peer, without a third-party

Who's going to show up at some untrustworthy place with fat stacks of cash in order to trade crypto?

> as it is initially meant to be used

It was meant to replace the USD for everything including everyday transactions.

> Who's going to show up at some untrustworthy place with fat stacks of cash in order to trade crypto?

Lots of people, actually. Its more common than you would think!

The hardest part is matchmaking and (optionally) escrow.

LocalBitcoin originally did this for IRL but then stopped as they were slapped by a regulator. They were taking a cut from the escrow and acting as a custodial wallet, which made it easy to spank them.

They are now kaput.

There are other, less stupid, platforms that replace them.

> Who's going to show up at some untrustworthy place with fat stacks of cash in order to trade crypto?

There are ways to transact P2P without meeting in person. Bisq is decentralized example.

> It was meant to replace the USD for everything including everyday transactions.

I did not read this chapter of the Bitcoin whitepaper

https://www.coindesk.com/policy/2023/03/27/eu-lawmakers-to-v...

That's not what the link says. It says:

- traders would be forbidden from making or accepting anonymous crypto transfers over 1,000 euros unless the identity of the other party can be verified

- Businesses would be forbidden from accepting over 7000 Euros in cash

- transfers between private individuals would be allowed even if they are large

- They are seeking to ban anonymous accounts

- Mixers, tumblers and privacy coins should be taken into account as risk factors when assessing money-laundering risk

It's essentially the same outcome, Brussels politicians have no idea what they're doing in terms of smart contracts. Clearly it's an AML measure but they don't understand that what they call "unhosted wallets" (i.e. just random regular wallets) is as essential to decentralized applications as MAC addresses in legacy networks. Requiring KYC from every single wallet is insanity and will of course never work. So if that becomes law, it kills any dApps in the EU, only allowing centralized services to interact with known customers. Which defeats the entire point of blockchain tech. What would still be allowed would be some exchange like Coinbase offering services to KYC'd customers I guess. So at least they might be able to participate but they could do nothing on Web3 on their own. It would be a walled garden similar to the GFW of China vs the wider internet.

Again, I suspect this comes down to incompetency and isn't even intentional. They want to regulate the space but they don't understand what smart contracts are and how dApps work.

>If the customer's identity can be verified or if a regulated crypto provider is involved, the transaction would be allowed.

I'm not sure that's that bad. I've got some crypto wallets but the stuff has got there by me transfering fiat to Kraken, with KYC, passport scan etc and then the USDT or whatever to the wallet so it's easy enough to trace it to me.

If you allow fully anonymous stuff to interact with the regular financial system it does kind of leave it open to all sorts of tax evasion / illegal activities.

This. Anonymous interaction with the regulated system won't fly, regulation cannot be applied to unidentified entities. Anyone can have their blockchain, just don't expect police or courts to protect you, they may hunt you instead.

You mean anonymous like cash?

Do you want to make cash illegal and the government to trace every single financial transaction you do? Even worse, web3 is mostly not about money in the first place. Do you want them to track everything you do online, every app you interact with, every file you uploaded?

Seems connected to the other post in HN: "EU Commission doesn't understand what's written in its own chat control bill".

Proof of reserves in itself is not proof of very much if the exchange has undisclosed liabilities and costs, which may supersede the claims of depositors in case of insolvency/bankruptcy.

Do Krakens proof-of-reserve audits protect against some other bitcoin exchange using the exact same coins to also produce an audit for a different set of customers?

You do understand that proof of reserves is the opposite of what is being claimed right? Ah, ah, the accounting firm that use to do those engagements even stated thus in its refusing to do more of them.

What is required to proof reserves is a full audit instead, which no shady speculator will do which is in fact what all these 'exchanges' are which also means your crypto is at full loss category if you are using them.

Why do I think this comment will age like spoiled milk?

"Coinbase, Kraken Under Investigation by US Regulators" - https://bitcoinmagazine.com/legal/coinbase-kraken-face-us-in...

"Kraken Pauses Deposits, Withdrawals As Investigation On Fidor Bank Funding Continues" - https://thedeepdive.ca/kraken-pauses-deposits-withdrawals-as...

"for allegedly listing unregistered securities"

Hasn't coinbase repeatedly asked the SEC which tokens were securities and have yet to get answer... I don't think SEC strong arming is any indication of shadiness.

What I find fascinating is that CFTC claims Ethereum is a commodity.

Meanwhile SEC says Ethereum is a security. Specially after the move to PoS.

It doesn’t seem they can even agree with each other.

Why not? Gold is both a commodity and a security (think gold ETFs).

This logic seems like wishful thinking that people can't get rekt by both the SEC and CFTC, they can.

But each of those is a separate thing. Gold the commodity is traded and regulated differently than a gold ETF. Just because they’re both related to the metal does not mean a single regulatory body has dominion over both.

The answer is all of them except maybe Bitcoin and Ethereum.

The legality of all this isn’t confusing to anyone it’s just that they don’t like that answer.

No, the SEC has said "most crypto tokens are securities" and coinbase doesn't like that answer, so they asked "Specifically tell us why and how specific tokens are securities" and the SEC has not responded to that request because helping companies skirt securities regulations is not part of their job, in the same way the IRS does not recommend which banks are bad about sending them tax info and the same way someone working for social services cannot legally instruct you on how to hide your assets so that you can get covered by state end of life care.

Lol at thinking that asking a gov't agency if your conduct is illegal is some sort of means of immunizing yourself from the illegality of your conduct

Both of the articles you linked are old though

Is a month recent enough?

"Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges" - https://www.sec.gov/news/press-release/2023-25

There's a difference between offering "unregistered securities" (which is practically the very definition of a crypto exchange) and stealing user deposits.

The unfortunate reality, though, is that Coinbase depositors ARE unsecured creditors of Coinbase and may lose their deposits in the event of a bankruptcy. This is all spelled out in their quarterly filings.

Not your keys, not your crypto as they say.

Kraken refused compliance with NY crypto exchange protection rules. Kraken had to shut down (in the US) some aspects because they refused to follow SEC guidelines for protecting user deposits. Kraken has had to pay fines for unregistered margin trading.

These are not the actions of a company following best practices for protecting depositors.

Kraken uses misleading language in their blog, while claiming to do "audit" everywhere they actually write that they (Kraken) do the audit and then some no-name firm "verifies" audit results. So that's practically a pointless claim and provides zero data as to what are financials of the Krakes, do they have reserves matching liabilities, do they commingle funds, do their reserves consist of shittokens or no etc. Interestingly r/CC community bought Kraken misinformation hook, line and sinker. In a few years they will cry that nobody has warned them, after it will be Kraken's turn to go bust.

Kraken is run like a cult for miserable employees! Proof of reserve are worthless: show us the liability balance.

Yes, we take this very seriously at Kraken. We're even trying to launch a full-reserve US bank! :-)

I think they flouted financial regulations, rather than flaunting them.

Uniswap DEX

Good luck using fiat with that.

Crypto is gambling. Equally barely legal, equally based on nothing but bullshit and greed and hopes for the big win. Equally only 'the bank' wins at the end.

I'm not pro-crypto or anything but how is that different from the stock market in general, or venture capital investment even?

The stock market is highly regulated (no rug pulls, no insider trading, no pump-and-dumps). Stocks are uktimately backed by a company's property, and companies have meaningful ways of appreciating in value that are not purely speculative (especially if you stay away from meme stocks like Tesla or GameStop).

I dunno, Bitcoin loses 65% of its value and it's a scam, but Netflix does it and it's... not a scam?

SVB implodes and investors (but not depositors) lose everything and it's ok.

You're nuts if you think there's no insider trading or pump and dumps on the stock market.

Seems like a double standard.

This all has more to do with maintaining a monopoly on the financial system and certain classes of participant in the US wanting to maintain the power to collect rents. And there really is no counterbalance to their unchecked authority.

Yes, companies can legitimately lose their value over time. Think of Kodak or Nokia - would you say they are producing as much value as they were in the 90s or 00s?

Now, some stocks have a real value + speculative value on top. Netflix and many other tech companies are in this state, and the speculative value can go down way more than the real value. But the floor for Netflix stock is waaaaaaay above 0. The floor for BTC and similar is 0, by contrast.

As for pump-and-dumps and insider trading etc - sure, they happen, just as thefts and muggings happen. But they happen a lot less then in crypto-land where they are fully legal, and where, even if they weren't legal, no one would be checking for them.

Netflix and other tech stocks did not lose their value over decades, it happened over the course of months. But yes, market volatility is a thing for stocks as well as bitcoin. They're the same in that regard.

"Bitcoin to zero" is a matter of faith at this point, I don't see it happening and I haven't heard anyone explain a good model for how it happens. US is certainly trying its best to outlaw it. Still won't go to zero.

I think my larger point is if the government wants to go after something, go after fraud--in crypto or "Fintech" or banks or stocks or whatever. And mostly they are! But then they're also leaning on banks to cut off the ability to convert crypto to fiat and that's a bunch of bullshit.

You're discussing faith while the parent comment is discussing finance.

Stock buybacks aren't institutionalized insider trading, then?

> Stock buybacks aren't institutionalized insider trading, then?

There are even corporations that announce buyback and then don't do it. For stock it's enough to jump up and then random shareholders that accidentally sell their shares in specific window that allows them to profit from such fake buyback get very rich while people waiting for buyback are left with the bucket. It's completely not pump and dump.

Oh, sweet child of zero interest rates. You can't see how Netflix could go to 0?

Let me tell you about the 90s...

how can you argue the utility of BTC vs Netflix? one is ultimately fugazy, the other provides a legitimate service. now unless its board colludes to tank its stock price, it's not a scam since the company still does what it says on the tin

How is censorship resistance and unconfiscateability not a legitimate service?

Have you heard about rubber hose cryptoanalysis? The state can literally put a gun to your head and pull the trigger. Crypto is not "unconfiscateable", it's just digital. BTC also isn't "censorship resistant" as the censorious regime can still tie a wallet (and thus its transaction history) to your identity. Used a tumbler service to hide your tracks? Congratulations, now you're guilty of violating anti-money laundering laws, too.

The difference is the dividend. A stock is a right to vote and a slice of future profits. Stocks are speculation about future profits, which we then build mechanisms to express optimism or pessimism on.

https://en.wikipedia.org/wiki/Dividend

Plenty of crypto tokens also pay the equivalent of dividends - Ethereum, GMX, Balancer, etc. These come from the profits the platforms make. Almost all tokens give you the right to vote.

A stock, yes. But futures? Derivatives? There are tons of speculative financial products that don't grant a right to vote and a slice of future profits.

"Expressing optimism or pessimism" also doesn't sound very scientific or rational.

It’s not that there is no insider trading, it’s that there are government regulators investigating and prosecuting violators.

Just for example the amount of wash trading in crypto is substantial, and if done on stocks would be found and prosecuted.

Typically when a business declines it's because a competitor in the market is picking up the consumers sweet dollar dollar. That's why buying whole markets makes sense.

The entire cryptocurrency universe can go away and people can blow their disposable income betting on the horses or eating out instead. There will be no good or service missing in the market.

>There will be no good or service missing in the market.

A lot of services would go missing, actually!

Ransomeware gangs would no longer be able to easily receive their ill-gotten gains. The North Korean regime would lose a major source of funding. Darknet drug marketplaces would have a much more difficult time facilitating illegal activities. Etc.

How much of stock's value is backed up by company's property and how much of that % is pure speculation?

VC investments are literally based on speculation. Sure, that speculation is informed and certain investors can help those speculations come true (e.g. Rocket Internet is infamous for investing in a range of similar startups because it allows them to bet on competitors and control the market without running afoul of anti-trust laws) but it's still speculation about the possible future value rather than the state of things.

It should also be telling that just betting on the best performing stocks consistently is a more successful strategy than using intricate metrics and trendlines to try to predict future successes, just as counting cards is a better strategy than whatever astrology habitual gamblers come up with. Of course nothing tops the success rate of "insider trading" (i.e. cheating), which is why it's illegal.

I'm sorry, but you can't just say something is X with the caveat "but you have to ignore Y and Z, which are examples where something is NOT X".

What happened with GameStop and other meme stocks is exactly the definition of a pump-and-dump.

... and I say this as someone with enough faith in the stock market to invest heavily in it.

The stock market is highly regulated...

So is gambling.

Of course, "Illegal stocks" (or their equivalent) and illegal gambling aren't.

>only 'the bank' wins at the end.

There are a lot of people who have got rich in crypto who are not 'the bank"

Sure if everything went to zero you could turn around and say there was nothing there but so far bitcoin goes up and up if with dips, while fiat currencies trend to zero if you adjust for inflation.

There have been a few major runs on Binance, measured in billions. So far they've not skipped a beat as a result. Certainly nothing like FTX.

No guarantee of future performance, of course...

> So far they've not skipped a beat as a result.

Except for all the times they have "halted withdrawals" while Tether printed out a couple billion fun bucks. Don't trust me, look for yourself: https://www.google.com/search?q=binance+halts+withdrawals

It's impossible to run a crypto exchange without halting withdrawals periodically, especially when runs are happening.

This is due to the security balance between difficult-to-access cold wallets containing the majority of funds, and easy-to-access hot wallets containing the minimum required for expected daily operations.

No idea on the coincidence with Tether minting, other than Tether mints often whether directly or indirectly as a result of market conditions, which of course may also be influencing exchange withdrawal dynamics.

> They’re a shady crypto exchange (is there any other kind?)

Yes. Bitstamp.

Matt Levine, yesterday:

> A decent rule of thumb is that all cryptocurrency exchanges are doing crimes, and if you’re lucky your exchange is doing only process crimes.

https://www.bloomberg.com/opinion/articles/2023-03-27/the-cf...

pithy, but there's already a saying that says, on average, people commit 3 felonies a day?

There's a big difference between the average American incidentally violating felony statutes in the course of every day life, and the cryptocurrency situation where it's never really a question of whether they are intentionally committing crimes. There's questions of which crimes, how big, and whose funds get lost/stolen...but there's always crimes.

A lot of why there are crimes is that crypto is inherently global but there two hundred or so different countries out there making ever changing and vague laws so allowing someone to exchange one token with another one will probably violate some regulation in some country.

No need to go that far. Crypto main selling point is anonymity. There is not significant bitcoin exchanges out there which is not processing crime money and I mean actual crime: extortion, drug trafficking, human exploitation and let’s not even talk about fraud. There is no need to whitewash them.

Which is generally not true anyway, same as lots of sayings.

n.b. They flaunted the fact that they could get away with flouting regulations.

Pedantic: "flouting" not "flaunting", excepting that enough people use "flaunt" enough that it's gained that usage too.

Question that I'm sure has been asked a million times, but I've not really seen an answer that satisfies me:

What's the fundamental value of Crypto?

It's utility? If so, I'm sure there's a calculation you could make that compares the number of "useful" legal transactions (economic activity) vs. the market cap. I'm assuming the numbers are probably ridiculous, however; the equivalent of 1,000s of dollars of "value" per real transaction.

My assumption is that the bulk of Crypto's actual value is its ability to hide flows of money from regulators (tax avoidance, drug money, silk road transactions, etc). KYC rules probably have helped in this regard, although I'd be interested in someone in the know having an opinion.

Do we have estimates for what % of crypto transactions are not provably legit?

Binance has always delivered. They are ranked number 1 for a reason, namely Trust.

I'd be very interested in reading actual proof of them being shady. Please do share.

I would have thought they are ranked number 1 because they are lenient about KYC/AML.

Not my experience. Regarding KYC: I have had to redo KYC in intervals and every submission had to be legible and they were picky. Not convinced.

AML routines and that game I have no knowledge of. So maybe.

How much money did you trade though. If you look the other way on KYC, you only do it when there is millions on the table.

You used to be able to use binance without KYC in its early years but more recently (around 2019 onwards) it has started requiring KYC even to get on the platform. At the same time they've forced old users to either provide KYC or disable their accounts. This probably only applies to EU users though.

Here's the proof: https://news.ycombinator.com/item?id=35327996

Here is an example of why Binance is shady: https://cointelegraph.com/news/binance-proof-of-reserves-is-...

Story written based on input and allegations by one of their main competitors. Not convinced.

Keep your money there and find out soon maybe.

I hope they're solvent. But I'm not betting my money on that.

This is a good start to investigate this: https://t.co/Jm6dVoDqM5 Binance is somewhat transparent about their holdings.

There was a reason Bernie Madoff was one of the most respected men in finance. He always delivered high returns and always met withdrawal requests promptly. Until one day he didn't.

Sorry, what?

Binance came out of nowhere with massive fake volume, as a China-based exchange pretending to be based in Hong Kong. They've proceeded to thrive by having a reputation for giving accounts to anyone, globally (which, TBH, is not a bad thing as they operate in countries where it's better than trying to save in the local currency). And their home country is "somewhere you are not".

There is no basis for believing that they have maintained all the funds: why would they?

There is basis for my postion and point of view. You can see their cold wallets and inspect the wallets for Binance moving funds. If what you stated were facts, we would most certainly agree. But the thing is, they are not true. See data below.

---

#Binance published cold wallet addresses and balances for 6 of our 600 coins. More to come. 475K BTC4.8M ETH17.6B USDT21.7B BUSD601M USDC58M BNBThese were public before anyway, but organized together for your ease of viewing.https://t.co/Jm6dVoDqM5

— CZ Binance (@cz_binance) November 10, 2022

Binance were banned in multiple jurisdictions for fraud.

https://web3isgoinggreat.com/?id=cftc-sues-binance-and-ceo-c...

> Binance were banned in multiple jurisdictions for fraud.

> https://web3isgoinggreat.com/?id=cftc-sues-binance-and-ceo-c...

The link you posted is unrelated to your claim. It is about the US CFTC suing the Binance CEO on allegations of violating trading rules.

There is nothing mentioned there about about fraud or being banned in multiple jurisdictions.

They are banned in the US and the UK. The lawsuit is specifically about illegally trying to evade that ban.

That is fraud and there are many many other examples if you choose to do even a cursory search.

I'll just leave this here - https://twitter.com/web3isgreat/status/1640373566322491393

I just withdrew 95% of my assets from Binance, and they came really fast. Some within seconds. I know "not your keys, not your coins". I just had like 10% of my coins on there because I like to gamble, I mean trade.

and yet, others frequently attest to trying to get their money or cryptos out and being rapped in a loop of Binance repeatedly demanding more KYC and they never get their funds out

Moments ago I withdrew 5 figures worth and it literally took 6 minutes. If someone hasn't done enough KYC then... they haven't done enough KYC.

Isn't adhering to KYC standards what we want? How is that bad?

Yea my account is already KYCed. They make it pretty clear how much you can withdraw without the KYC. So I guess, don't put your money in there until you are fully verified.

>Hopefully Binance still has all the money

How can they? SVB has made it clear that it is very difficult to maintain value. If Binance has invested all their money in securities, it's not unlikely that their investments have gone done down with the rising of the interest rates.

If they keep all money in regular banking accounts, they may still have it. But they are exposed to the risk that their bank or their banks become insolvent.

I have doubts about their finances but that comparison makes no sense. SVB is a bank, Binance is a cryptocurrency exchange that doesn't have the fiat custody issue to that extend because they're mainly not dealing in fiat. It's more of a question of how companies like Tether have invested their dollars and the answer is nobody really knows.

Tether has the same problem. What happens to Binance's Tether coins if Tether's bank collapses?

They claim most of their money is not with banks (number 1 is supposedly commercial paper). Also what is with banks certainly isn't with American ones. But this goes back to the point earlier about users having no idea about the reserves. No one should use Tether and I don't trust Binance for a second, pretty sure they trade against their own users. But it's also more resilient than many think, including people who are in crypto. Binance isn't well trusted by insiders and whales. But they have a lot of customers, especially in developing countries less served by more reputable exchanges and banks. And since they offer USDT, USDC as well as their own stablecoin, whatever that's backed by, it would not be catastrophic for them even if one of the stablecoin issuers went down.

> number 1 is supposedly commercial paper

They claim to have divested of it all, without any losses, during a significant downturn.

They claimed that before the banking crisis, after there was considerable pressure on them to disclose where the reserves are kept (many in crypto doubted if all the money even exists). At the time it didn't look good because what everyone wanted to hear was that they keep it as cash in a bank, so the commercial paper disclosure was seen as negative and risky. Ironically it turns out that this might actually be safer than what USDC did. They played by the book and wanted to prove full solvency by having every single dollar in bank custody. Which nearly cost them their neck with the SVB failure when parts of the funds got frozen and users panicked.

"Hopefully Binance still has all the money customers deposited and didn't lose it or trade it for magic beans like FTX did."

Of course they don't have all the money ! If they had, they wouldn't be targeted by virtually all financial regulators on the planet and they would publish a real audit.

If they had money they would publish an audit, even if not required to do that to continue operations?

If they cared about building trust in an industry based on confidence, yes?

I think you missed the word "tricks" in there.

eg -> ... "an industry based on confidence tricks".

I agree with your first point, but realistically, is there any audit that would satisfy its critics?

If the Western governments want to take you down, no amount of words on a piece of paper sprinkled with legal incantations is going to stop them. They'll just decide something you did which was legal, is now illegal and go from there.

Your only real option is to abandon that sinking ship and let the captain feel in control. Years later when the population is on life rafts and they've elected a new competent captain, you can return.

you really think that is why they are targeted? cute. its about control.

This is literally the eulogy for SVB. Can we all just agree that 1) it’s ok for banks to fail and 2) it’s not ok for people who put their money in banks to lose their money.

So what is 3? Why don’t we just have nationalized banking? I mean, seriously?

If banks aren't allowed to fail then they become some kind of protected entity. Are you saying we should just let it happen?

That’s kind of the opposite of what I’m saying.

We need a secondary class of banks: ones that don’t leverage their deposits into investments, but rather simply keep people’s money safe.

That way you can choose your bank. Do you want a bank that will actually yield return on your deposits and pay you back in kind or do you just want to keep your money safe? It would effectively bring back investment carried savings but also allow people to store their money in safer banks with actual deposit insurance if that was their goal. The problem is that a bank is a bank and we don’t know what their business priorities or risk calculus is in any meaningful terms, so how are we supposed to choose a “safe” one?

There are legal changes that could be made to safely support that in different types of accounts without requiring customers to switch banks. In my view anything referred to as a deposit should be insured in any case, but there are other possibilities for making a conservative return.

There’s a theory that if there was such a bank, all money would flow to it making all of the other ones insolvent, in turn the financial system would collapse, since no bank has enough. The whole industry is just a house of cards.

There was actually a recent case where one bank (Custodia) tried to do this - they wanted to charge fees instead of gambling with their clients money. But the FED denied their application. They say it’s because they wanted to service crypto companies - but how would that even be a problem if they’ve always got all the deposits at hand. It smells fishy.

Why would all the money flow there? Assuming the $250k insurance level remained the majority of Americans could happily keep their money in riskier banks and earn interest instead of paying fees.

Most of the money in the system is well in excess of $250k accounts though. And the FEDs insurance fund is laughably small. Not a lot of people have to move there money to cause a major cascade (see SVB for example).

I've heard this suggestion in lots of places - mainly silicon valley people who didn't really think about banking a lot until the collapse of SVB (the All-In podcast had a monstrously bad segment on this for example).

The problem is that those suggesting this aren't really engaging with how our finance system works. What they're saying is "I don't want my money at risk" but what they're proposing is "I don't want to ever be able to get a mortgage". They're saying "I'd be happy with an account that doesn't pay interest" but actually, if this product was offered, you'll likely find people still opt for the interest paying accounts that have risk because they aren't really capable judging that risk.

It's also just quite a difficult thing to imagine happening, can you imagine it - out comes this product from a bank "100% backed, guaranteed not to default, 20bps charge, 0 interest", and let's imagine it really is popular and capital flees to it. You've just caused the single biggest run on the US banking system in history. How do you mechanically actually make this work?

If you decide to give someone else money, you have a responsibility to think about whether you are likely to get it back.

These bankers are dangerous idiots who are destroying millions to billions of value. It is a terrible idea to start handing out free passes to the people who enable them - ie, depositors. It is easy to imagine a bank that doesn't have bank runs - 100% reserves. If a person is going to put their money in banks well known to be a house of cards then they have some responsibility to pay for when the cards collapse.

We cannot sustain a system were people just donate money to Joseph Gentile again, and again, and again. They have to stop doing that. And losing money is the only way to make that happen, anything else will let too many cockroaches through the screen. Instead, the proof in the pudding right now is that he is one of the safest people in the world to give money to!

We don't give anyone a free pass, we have a regulator tasked with ensuring banks don't fail on behalf of depositors.

The emergency-interest-rates-for-10-years regulator? The ones who just set the big interest leaver from "free money for idiots" to "drive the economy into the ground" to trigger all the excitement this year? Or is it a different regulator for banks?

These regulators are the ones driving the market to take these stupid risks, they slowly push out anyone who tries to make sane decisions by giving handouts to people who insist on setting their own money on fire. They're systemically removing the major incentives for people to think before acting.

There is an easy, sustainable path to a robust system here that creates wealth - stop making prudent investors pay for the reckless risk takers. That means we don't just pay out people who give no thought at all to what their money is funding.

Adorable. You know it's regulators that are declining banks with 100% backed deposits?

Regulatory capture is more dangerous than no regulations because of naive people who dont see the graft despite it getting worse every year, decade after decade.

> 2) it’s not ok for people who put their money in banks to lose their money.

The only way to fix this is to ban fractional reserve banking (FTR: we have now something even worse than fractional reserve banking because now the deposit guarantee required is 0%, which means it's not even a fraction anymore). Good luck with that.

> I mean, it sucks for Binance, but they are kinda shady and the world might be better off without them.

For countries like Venezuela and Argentina, Binance has a messianic reputation in the sense that P2P currency exchanges are what keeps the economy functioning for the lower-rank citizens. Top-tier citizens just use Zelle, but as you might not know, not everyone can afford/is allowed to go the U.S. and open a bank account (e.g. I, for instance, was denied a tourist visa last time, though I am more than able to afford vacations there).

If Binance were to fail, other P2P exchanges (like Reserve, Airtm and the now-dead Localbitcoins) wouldn't be able to take up with the current volume of P2P transactions of both countries.

I'm not saying these countries would grind to a halt as "direct" P2P currency exchange would still exist, but people that rely on Binance P2P for their day-to-day operations would downgrade their lifestyle, big time.

Those benefiting from traditional banking, ie the 1% of the world in the US and EU, are largely completely naive to the tragic despair of the other 99%, either completely unbanked, oppressed via predatory inflation policy and capital controls or just simply rigged against them.

Crypto was created from the ruins of bailouts where the poor masses where put on the hook for the crisis created by central banks ad wall st. That hasnt changed. Innovation and critical mass usage will arise from the bottom up, Nigeria, Venezuela, Argentina, El Salvador. Nations like the US and EU will be the last to embrace it, at their peril, when they have no real other choice to not be left behind.

It's so interesting to see the tone differences when SVB was on the edge vs Binance

I my speaking in general here because I have no idea what you're opinion may have been on the SVB depositor bailout. The large majority of commentary I saw over the weekend after SVB failed was how it would wreck average customers and how the government had to step in to make them while. I'm not sure if it's because this is Binance or crypto in general but it seems like people either don't care or want to see it fail regardless of their depositors' investments

Banking is a requirement for businesses to function. Depositors have no choice but to put their money in some bank. It's debatable whether depositors ought to take a haircut or be made whole if their bank suddenly fails. The greater the perceived risk of deposits being held at a bank being worth less than 100 cents on the dollar, the more flighty deposits will be. Even if depositors got back 90% of their money, the concern with SVB was probably more about how long companies' cash would be inaccessible. Perhaps some of the hubbub the weekend SVB failed could have been avoided if the FDIC was able to have some sort of policy to release immediately not only the insured amount, but perhaps also some "safe" percentage that is expected with some confidence to be recovered, like 50%.

Meanwhile, over in crypto land, choosing to gamble on the volatile price swings of speculative digital assets (aka "magic beans") in a market driven in no small part by people evading laws—whether it's illicit purchases, money laundering, ignoring securities regulations, wash trades, pump-and-dump schemes, etc.—is a completely different matter.

It is still, in a certain light, sad that someone would become unemployed because their crypto startup employer's capital was lost in the collapse of a fraudulent exchange. Or someone lost their life savings. But really, what did you expect would happen?

While one could be less sympathetic of small business employees losing their income due to a bank failure or more sympathetic of a crypto user losing their life savings, they're drastically different circumstances. I don't see how one could expect people to either take a blanket "save all depositors and gamblers" nor "all depositors or gamblers should lose everything."

Keep in mind also that practically no one has argued in favor of shareholders in SVB getting anything but a 100% loss on their equity. If you view crypto people as "investors" then there should also be the expectation that one of risks they are taking by "investing" in magic beans is that whether or not they turn out to be magical, the place that stored them may unexpectedly blink out of existence.

I would have almost certainly lost my job if SVB depositors weren't made whole, so I'm not exactly taking lightly the aftermath on depositors if a bank fails. But the entire system of fractional reserve currency is based on the idea that putting money in a bank is effectively investing in the bank's future.

There's already a process for depositors in a bank failure - FDIC insurance pays out up to $250k and the bank is taken over by regulators. The bank is eventually liquidated and depositors get priority on their share of the pie to get back as much as possible.

Why do we even bother having FDIC insurance if every deposit should be secured to 100%? How does that work without the guarantee of government bailouts easing the risk of bad bank investments? And how does that work at scale if multiple banks go under, where does the money come from to save depositors? Does every bank depositor bailout risk inflation?

There's just so many fundamental questions as to why we even have a fractional system if we don't, at the end of the day, want a fractional system. We can't have our cake and eat it too, either our money is thrown in a vault and always safe or the bank reinvested it and the money is replaced with an IOU.

If the deposits don’t exist it’s still fine. A lot of people have lost deposits from crypto collapses and they’ve been fine, because currently no one uses crypto for actual working day to day capital (paying bills), it’s all speculative holdings that they could afford to lose.

Ehh, lots of people put money there they really can't lose, such as savings for a house down payment. Financial literacy is very rare.

I would say that at least any Americans who lose money there "deserve" what's coming to them since binance was banned in the US.

Meh, anyone who’s saving for a house down payment wouldn’t be putting their money into a speculative asset. They knew exactly what they were doing.

If Binance (hypothetically) does have 100% of the customer reserves, what difference does it make if they all withdraw? Doesn’t Binance make money off of trades / transactions rather than using the customer funds like FTX?

Anyone who did their research knew Binance was shady…

They didn’t have an HQ, come on, criminal organisations don’t have an HQ. Companies have them.

Shady connections to China, BSC was a mega scam, just ridiculous.

> criminal organisations don’t have an HQ

Yes, they do

And even if they didn’t, OP’s logic is not self evident.

I mean, it's self evident if you're the sort of person who wouldn't buy a pair of shoes from a website that didn't list a physical address, much less wire them money.

In all fairness, I didn't wire them money so much as shady internet points which I traded for other types of internet points on their site (and promptly removed)

In addition they did have a HQ in China until around 2020, but then had to completely leave that market because of the crackdown under Xi. Same as OKX and other Chinese companies.

I still think Binance is shady but that's independent of the move. Lots of companies are moving to fully online work right now, is Shopify shady?

https://fortune.com/2022/05/20/shopify-president-office-life...

Is there a large, legitimate business anywhere that doesn't have any headquarters at all?

Gitlab has no offices

You mean the unoccupied 10sqm headquarters on no-corporate-tax island #7? Or their other headquarters as listed on the corporate website and proudly shown off in their marketing?

Have you not seen the man with the golden gun? He had his own island hq.

Rather surprising to me that it's taken this long to bring such a lawsuit...

They literally don't put a headquarter to claim to avoid all regulations

Incidentally, Yakuza have HQs, business cards, offices, office buildings, lots of presence in legitimate businesses (eg construction).

http://www.japansubculture.com/resources/yakuza-organisation...

yes, they're how it became obvious to me that "organized crime" has become part of 'legitimate government', or rather of "the state".

the state being this concept which encapsulates all institutions (government, academia, religion) and corporations (the military, the 'criminals' the banks, the media, etc) ruling over all of us; organizing us into a 'civilization'.

so the idea is that the legit government is really just the public known face of the state-apparatus, another part of this apparatus being organized crime, yakuzas in japan... chinese triads, italian mafia... latin american drug cartels, etc

Automattic with 2000+ people working for them and they want a word with you.

And GitLab... and few other companies that are popular on HN.

Automatic has a registered HQ at 60 29th Street #343, SF, USA. It just doesn't have too many (any?) people there.

Which exchange isn't shady?

https://www.nerdwallet.com/best/investing/crypto-exchanges-p...

Coinbase

Robinhood

Webull

TradeStation

etoro

SoFi

Binance.US

Gemini

Kraken

Crypto.com

Firstrade

I haven't heard of half of these...

Kraken. That’s the only one I haven’t found much dirt on.

>In May 2020, we became a remote-first company. Accordingly, we do not maintain a headquarters.

From the Coinbase S-1

https://www.sec.gov/Archives/edgar/data/1679788/000162828021...

Company that has filed a S1 with the SEC isn't quite the same as a company that won't tell you where they are based.

Whenever I see a headline like this, I ask: Is that a lot?

> Overall, Binance holds $63.2 billion in the exchange’s publicly disclosed wallets, Nansen data shows.

So, yes I think $2B is significant.

Less than SVB's $42B vs $175B in deposits though.

Was it caused by the Signature FDIC announcement? https://news.ycombinator.com/item?id=35350032

Occams Razor, for me anyway, is this announcement: https://www.wsj.com/articles/cftc-sues-binance-holdings-in-c...

Binance Sued by CFTC Over Evading U.S. Rules

Ah, missed that one, makes sense. Thanks!

Yet $42B in deposits withdrawn a single day out of $175BN isn't significant for SVB? What I am seeing here is $2B in outflows is like a leaking firehose for Binance, when SVB experienced a tsunami of outflows. It would have to take more than that to make Binance go under. Fast.

Surely you remember what happened weeks ago when tech bros here were screaming when their favourite VC bank and their pyramid scheme just collapsed?

Either way we all know that a crypto exchange will collapse this year. Who knows. [0]

[0] https://news.ycombinator.com/item?id=34201475

$63.2 billion of which:

- 30% is hold in USDT (for which there is 0 proof that it is 1-1 backed)

- 10% is hold in its own stablecoin BUSD (Not always 1-1 backed source)

- 5% is in its own native token BNB

- 15% is in small cap (shtcoins)

source*: https://protos.com/binances-stablecoin-busd-hasnt-always-bee...

So, how do you bet against them now?

Short BNB

But there is no way to know the timeframe. That is one of the things I don’t understand about shorting.

Shorting is gambling if it isn't informed by knowledge that is legally obtained but not common.

And even then: the kind of leverage that you are playing with has limited upside and unlimited downside so it isn't for everybody. Trading in stocks at least has a limit on the downside (but lacks the degree of leverage that you can get with shorting). The main risk that you've correctly identified is that even the best information will come with caveats around the timeframe, the next being that you can't assume you are dealing with rational actors.

That's why you see parties that short based on relatively unknown information publish that information as loud as they can after they've made their trades so that they can control the timing to some extent.

>Trading in stocks at least has a limit on the downside (but lacks the degree of leverage that you can get with shorting).

Shorting downside can be capped and leverage gained by purchasing puts.

Trading stocks long absolutely has leverage from margin and even much further leverage available through the purchase of calls.

> That's why you see parties that short based on relatively unknown information publish that information as loud as they can after they've made their trades so that they can control the timing to some extent.

Case in point...

https://news.ycombinator.com/item?id=35278316

You can just keep shorting it (depending on the timeframe). Just pay whoever gave you the shares a monthly "rent". You are just betting that you will be making a profit that is larger. So if it takes 3 months to go down, you need to be sure that the shares will drop more than the rent you pay in these 3 months.

https://perp.planet.finance/en/futures/BNBUSDT

Buy BTC. My reasoning being: people will pull out the little money that's still left in the Binance ponzi and will (possibly) convert to or withraw in actual real BTC in their own wallets.

It might cause a ripple effect where other people do the same in other exchanges out of fear.

One day people on the "normal" stock market will also wake up to similar things happening there and will start moving shares from ponzi brokers to the direct registration system.

I think BTC comes out better than the other coins buts it's way down too.

Check the chart again since I wrote that comment ;)

No, get out of crypto. Another big player going down is just yet another bullet hole in crypto's reputation.

Binance is not a crypto player. It's a ponzi player. Not the same thing.

If Binance wasn't "fractional reserve crypto broker" (aka: ponzi) we wouldn't be having this discussion.

It’s literally exactly the same thing.

No it's not.

In one case you buy a Bitcoin and you get to own a Bitcoin.

In the other case (Binance) you buy a Bitcoin and don't get to own a Bitcoin (or in the very best case: you might or might not get to own that Bitcoin you bought).

Not the same.

But does it matter if Tether is 1-1 backed (or any of your other points) if what the customers deposited is those things?

As in, Binance hasn't failed if USDT goes to zero but you're still able to withdraw that Tether you have in Binance.

Depends if they used any of that money to make any other crypto bets to improve profitability. That’s what gets you.

The USD has never been 1-1 backed. Still seems to work just fine.

That's because a very large number of people believe in the government they elected and an even larger number of people believe in the US economy and its international trades.

If not for that the US dollar would evaporate but as long as all of these people believe in it and use it as the reserve currency for the world the US dollar has nothing to fear. It may fluctuate but you can't do a 'bank run' on the USD. You can do all of the usual forex tricks (including shorting the USD) depending on how much your own belief is at odds with a counterparty that holds a (slightly) different belief. George Soros famously made a fortune (a cool billion, which was a lot of money in the day) doing just that with the British Pound.

Individual banks may go under, but they all use the same underlying currencies. Binance has a similar problem (but different in many important respects). The number of people that 'believe' in Binance is a lot smaller and if enough of those people want their money (for instance USD!) back then Binance had better cough them up or they'll go bust. If you don't have a deposit there you are likely either a neutral party or you are already liquid (in that case: good only). If you do have a deposit there and you're willing to let them hold on to it then you are betting that they will stay in business.

I don't know about your financial situation but if you can't afford to lose your money then you may want to update your status bits on this news, a $2B outflow in a short period of time is not something a company like Binance can sustain indefinitely, where 'indefinitely' is something like '30 days'. It will be interesting to watch this play out and to see if they manage to hold the fort. Personally I would be highly surprised if they can sustain a drawn out run. But if they somehow can they'll be attracting a lot of business.

The US dollar is backed by the monopoly of force the United States government maintains primarily within its own borders and without as well.

The government requires you pay taxes in USD and will lock you in a cage by force if you do not. It requires that you accept USD as valid for commerce and again will lock you in a cage by force if you do not. If you attempt to counterfeit the currency, again locked in a cage by force.

The USD is as strong as the government's monopoly on force.

Crypto currency is backed by either nothing ("people faith" waves hands in a rainbow gesture) or some dude named Dan in Ohio or whatever.

The difference is that no one actually believes in bitcoin. They all plan to cash out in to USD later.

> The USD has never been 1-1 backed. Still seems to work just fine.

Others have mentioned the problems with this statement, but I'd like point out that it's also literally untrue. The coinage act of 1792 created the US dollar:

> Dollars or Units - each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.

> 30% is hold in USDT (for which there is 0 proof that it is 1-1 backed)

They've even admitted that it's not 1-1 backed by fiat themselves, so pretty safe assumption to make.

Tether's attestation reports are a form of proof that show they indeed are 1-1 backed by the value of outstanding USDt tokens at par. [1]. Paxos publishes the same for BUSD on ETH. [2] Paxos has redeemed $10B of BUSD (> 50%) in an orderly fashion over the past couple months as they wind their product down.

[1] https://tether.to/en/transparency/#reports

[2] https://paxos.com/busd-transparency/

Tether's attestation reports are not worthy to be my toilet paper.

BUSD on BSC has been demonstrated to not at all be backed by enough BUSD on Eth as managed by Paxos (which does seem to be backed)

While I don't like tether and am aware of some of its shady practices, people who bet against it have lost a lot of Bayes points at this moment in time.

Not an argument - here are some of the boring, platidinous responses: The market can remain irrational longer than you can remain solvent; how long did Madoff's ponzi last again?; why would anyone bet against the casino owner in a casino of their making; something something counterparty risk.

The Tether fraud has only really been rip roaring for about 4 years. We're still so early :^).

Attestation reports are not audited financial statements.

And? Having an income statement or a cash flow statement is not what Tether critics claim to want. The attestation report is basically a balance sheet for Tether showing their assets (cash, cash equivalents, etc.) and liabilities (outstanding USDt tokens). BDO Italia confirms Tether's assets by going directly to Tether's banking partners to get their info. The reports are point-in-time, but there have been several of them by now and each one has shown Tether to be backed.

Same for Paxos.

None of them are audited. Only a fool would believe anything they say.

The NYAG requires Tether to produce these reports. The NYAG would have already stepped in if these reports weren't to be believed.

Let’s revisit this comment in a year or three.

If binance users themselves hold 30% USDT on average it doesn't matter for Binance whether it's pegged or not (I mean, obviously it will still matter somewhat), since any de-peg event will also devalue any USDT user-balances

While it is significant, the article also does mention they've faced larger outflows in the past.

It is not. coinglass has the inflows/outflows of the top exchanges and they had worse days. Also their BNB seems to be largely unaffected though it did drop a bit... am wondering if the users are aware of these news, they don't care, or are confident Binance will come through.

Or it's mostly wash traded and manipulated so not very related.

>am wondering if the users are aware of these news, they don't care, or are confident Binance will come through.

Or this is evidence that the 'true' market is thin/insignificant and the price is mostly controlled by inauthentic volume that is coming from (and going to) Binance itself.

How does finding out that it’s less then 5% of what they hold lead you to the conclusion that it is significant?

I am guessing it is because that was "real" money, and what remains is "generously" marked to market.

Also remember now that the article is out that drawdown is going to be significantly more and much faster.

Withdraw issues being reported on reddit:

https://old.reddit.com/r/BinanceUS/new/

That is bigger news than the article's headline.

Looks like AML compliance, since it’s sporadic and they don’t say the reason. Everyone I know hasn’t had a problem withdrawing.

I just withdrew all my funds from Binance and they arrived in 5 minutes. Zero issues so far. I doubt they don't have enough money to cover withdrawals.

I also just withdrew EUR (12h ago) and it arrived relatively fast.

Just withdrew 5 figures worth of assets. It took around 5 minutes.

This is the news that got you to pull your funds off?

It's complicated.

Far OTM puts on BNB would be a good play to bet on binance failure or hedge, sorta like a credit default swap. Of course, not on binance. You could probably lend assets on binance to collect $ while hedging with BNB puts on some other exchange.

There’s terrifying credit risk at every exchange.

Meanwhile, in the country of Georgia:

New "regional hub" announced this week. https://gbc.ge/en/news/busines-snews/binance-announces-openi...

Meeting the totally not sketchy Prime Minister in November: https://1tv.ge/lang/en/news/1685013/

The US is recently working on an extradition treaty with Georgia.

https://ge.usembassy.gov/u-s-georgia-joint-statement-on-extr...

But I'm sure Zhao has made a few adjustments to his exit strategy after watching SBF and Do Kwon do the perp walk.

This is likely due to the end of the zero-fee trading promotion in the BTC pairs (https://www.binance.com/en/support/announcement/binance-laun...). It ended on the 22nd of March.

And here I thought that the most likely explanation was a Commodity Futures Trading Commission lawsuit.

Hopefully binance didn't straight up steal customer funds like FTX. It's profitable enough to charge hefty fees (compared to tradfi) and use customer info to feed your quant algorithms or act as a market maker.

On the one hand, I've been anticipating regulatory action for quite a while now. Crypto enables ransomware and other crime, although it does make it easier to track criminals. So it perhaps helps small time crooks and harms sophisticated ones. But if you're sophisticated enough you'll just switch back to cash. So I'm not sure why it's still permitted, aside from the legal difficulty of suddenly banning something you've already allowed for so long.

Then again, over the last several years long term treasuries have been an even more harmful pump n dump scheme (orchestrated by the Fed) due to their scale.

I hope the current wave of investigations, prosecutions and regulations will forge cryptocurrencies into something that is actually useful beyond speculation and doing crimes. Once the fight is settled, we may end up with something the general public and traditional banks will trust enough to use.

I'm surprised BNB is only down 4% since Monday's news: https://www.binance.com/en/trade/BNB_USDC?theme=light&type=s...

BNB is the 4th largest marketcap token out there [0] at $49B. The tokenomics around it are pretty sound (it'll eventually be burnt to be a maximum of 100m tokens) [1]. Binance has done a good job of creating a lot of utility around it that extends out beyond just their trading platform. It is also used as gas on the Binance Smart Chain. Owning BNB is as close to owning stock in Binance, as you can get.

Binance has been doing KYC for all sorts of politicians, globally, for years now. CZ is not some kid from Stanford living in the Bahamas, who was only printing fake money and pretending to be altruistic.

This will end up with a fat settlement, it won't end up with CZ in jail and the market is reflecting that. NFA.

[0] https://coinmarketcap.com/

[1] https://www.binance.com/en/blog/ecosystem/22nd-bnb-burn-8657...

Update: I'm getting downvoted, so I guess people are reacting to what I said instead of making a comment about what they see as incorrect. Just some clarity, I'm not some CZ fanboy, nor am I trying to justify Binance. What I'm trying to do is provide a bit of background on why I feel that the price isn't going to zero on this news.

Marketcap size of the token doesn't matter at all if the foundations are fraudulent.

CZ seems like some dude living to avoid persecution when the house of cards crumbles

> Marketcap size of the token doesn't matter at all if the foundations are fraudulent.

It matters in the context of something like Lehman Brothers, which was $60B.

> CZ seems like some dude living to avoid persecution when the house of cards crumbles

Persecution by whom? He's Canadian / Chinese, not a US citizen.

An honest exchange holds all their customers assets and doesn't lend them out to make profits on the side.

If they're doing that, then there is no incentive for them to hold customers assets.

So they should encourage customers to withdraw, and proudly tell customers how much money is outflowing and how no customer has had to wait more than an hour for a withdrawal today...

A legit exchange still has incentive for users to keeps funds on the platform as it makes it easier for the customers to keep trading. Not the most aligned incentive, but it's still there.

After a million headlines like this I don't really pay attention to them anymore. I'd be very surprised if Binance fell.

No fan of crypto, but big exchanges are always getting large inflows and outflows. That is how an exchange works: money enters and exits. Otherwise, it would not be an exchange. The important question is, is this outflow abnormally large? Is it negated by a huge inflow?

And interestingly, the value of binance coin (BNB-USD) is actually up quite a bit YTD. https://finance.yahoo.com/quote/BNB-USD/

Could it be an exit mechanism? Swap deposits at Binance to BNB, then export the BNB and sell it away?

That doesn't explain who's buying it

> doesn't explain who's buying it

People with deposits at Binance who want to get them out.

No, if you want to get your tokens out you're selling them to get something else than BNB (and BUSD) and this would drive the price down.

People who believe Binance is less likely to die than the market is pricing in, for one.

Personally I’m not sure, I think the recent charges may not be a huge deal and I don’t think Binance is default dead. But market sentiment has a life of its own and there’s every possibility there’s some sub-100% level of withdrawals they can’t survive. And while I think Binance is fine, I also wouldn’t be particularly sad to see it go either.

That makes no sense. First, people have no trouble exiting. Second, why would you swap BNB to exit? Just exit with BTC, ETH, USDT/USDC, etc.

It may follow XRP where people buy it as a means to protest USG.

it has held up very well , that's for sure

I saw a thing where groups are paying cash strapped Russians crypto to destroy their own infrastructure. This could blow back on the West, forcing the shutdown of crypto altogether. If I had any crypto I'd get out now.

And where can we find that thing?

I can't remember. I didn't think much of it at the time. The gravity of it sank in later. Probably some "anonymous" channels on Twitter, which is why I didn't take it seriously at first

That's almost as funny as hyper-targeting individual voters in swing states with propaganda based on campaign polling data you got directly from the campaign.

Spin up an AI dedicated to each registered voter in a swing state to figure out how to sway their vote. A few hundred or thousand in close races could be all it takes. "Joan B. likes to vote in person, she's likely to vote the wrong way, she's unlikely to vote if she can't drive to the polls, she owns a Tesla, which can be disabled with this software attack on voting day" I'm just blue skying it, but you get the idea. It'll be interesting to see what kind of targeting AI enables.

I have no doubt this kind of thing will happen. Micro-ai-targeting will make it possible to fake whatever film or images are needed to convince a person, along with a persuasive call from one of their relatives.

Russia exports about $700M of oil & gas per day.

The real liquidity of the crypto market is comically small to meaningfully help Russia circumvent sanctions.

It's a shame those allegations don't amount to criminal prosecution.

We need to have criminal liability for some of these things, I believe it would change how banking works.

It might be a bit harder to get a good interest rate, so be it.

DOJ may be waiting for CZ to stick his head up in a friendly jurisdiction.

While Dubai (where he's allegedly living) doesn't have a formal extradition treaty with the US, they are nevertheless stepping up extraditions for money laundering: https://archive.md/faqoU

The CFTC complaint is very weird - it details a ton of serious crimes up to knowing terrorist financing, and then charges them with ... offering derivatives to US hedge funds without having registered?

And they got this information by cracking CZ's phone!

that complaint reads like it has a shadow twin document, and that shadow twin is a DoJ indictment for CZ.

> it details a ton of serious

It alleges but provides very little evidence, including their primary claim that binance "solicited" US users which they don't show at all

you could only say that if you had not read the document, listing all the chat conversations where they're trying to do that precise thing

all of them show that they tried to either stop us users or nudge them to go offshore to keep trading. where is solicitation implied?

I have no understanding of that world, but maybe that's the thing they use to draw him into scrutiny, which will justify further investigation.

I have no sympathy. I mean, I hope Justice prevails and don't want anyone to lose their shirt due to undue scrutiny, but it looks like a lot of smoke there.

> I have no understanding of that world

> it looks like a lot of smoke there.

Sbf is on trial.

Cz's alleged crimes are much less bad IMO, and no worse than a lot of other white collar crime. Binance mainly only "victimized" more sophisticated players like hedge funds or Americans who knew it was illegal but wanted to trade crypto derivatives anyway.

Any business that needs to hide it's operations under layers of obfuscation, offshoring, break rules, avoid oversight and literally admits to 'Being About the Crime' is a de facto criminal operation. Or rather 'infrastructure for criminals'.

SBF got caught is the difference.

It's a scam from top to bottom.

I don't care about 'bankers or traders' in the US but I do care that regulations exist for a reason and that the supposedly headline libertarian ideals are mostly a cover for what ends up just being bad stuff.

I have no problem with those operating in transparent environments.

Heres the real question in this game of whack a mole. Where did all the money move too?

That's what I'm wondering. Is there any idea of how much of say, Bitcoin, is held in cold storage? I saw some estimate a while back that said as high as 70% and that seems high to me for some reason. If true, it definitely speaks volumes about paranoia around exchanges.

And yet somehow no one has had the bail them out yet. How bout that..

Having JPOW as a backstop is a feature not a bug.

Time to see if the emperor has clothes on.

so the day of regulatory capture is finally here

This is good for bitcoin. /s

Is there a short option?

USD

There are perpetual BNB/USDT futures on poloniex, for whatever thats worth.

Haha you get to trade one scam against another.

Couldn't you chain the derivatives to achieve the desired pair?

The big issue with that type of future is the part where you go long on USDT.

You can short Bitcoin. ProShares Short Bitcoin Strategy ETF NYSEARCA: BITI

Be careful, it's a fake market and you have no idea how easily they might be able to control the price, for a while at least

Also, massive counterparty risk. If you win big you will likely find you can’t collect.

You will get wrecked, but yes you can use defi lending dapps to short BNB without counterparty or systemic risks.

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