Binance closes its derivatives arm in Australia

Binance announced it would be closing its derivatives business in Australia "following recent engagement with ASIC", referring to the Australian Securities and Investments Commission. The subsequent day, Reuters reported that ASIC had withdrawn Binance's financial services license at Binance's request, related to an ongoing investigation into Binance. The investigation has been underway since at least February, and involves misclassification of some Binance retail customers as wholesale users. Though Binance has forfeited its license, the investigation is ongoing.

Binance will continue to operate its spot exchange product in Australia, but customers will no longer be able to trade derivatives on the platform after April 21.

Rumor tweet by crypto influencer causes BNB and Bitcoin sell-off

Crypto influencer Cobie made a wild guess on April 3 that an Interpol red notice might be issued for Changpeng "CZ" Zhao, the CEO of Binance. Binance has recently been hit with a civil complaint out of the US CFTC, whose contents are causing many to reasonably speculate that CZ might face criminal charges from the US in the near future.

Cobie decided he wanted to make a record of his prediction, so he tweeted the SHA-256 hash of the string "Interpol Red Notice for CZ". Typically, this would allow him to later reveal the seed, allowing him to prove after the fact that he had indeed made a correct prediction. Why? I don't know. Bragging rights I guess?

Anyway, according to Cobie, one of Cobie's inner circle leaked the seed, and the contents of Cobie's prediction were widely circulated on Twitter. Some thought the prediction was inside knowledge of events that had already transpired. Someone else began circulating a doctored screenshot of the Interpol website, purporting to show a red notice. People began offloading their BNB tokens (the native token for Binance and Binance's blockchain), causing a sudden 3% dip in the token price. Bitcoin also fell on the news.

US CFTC sues Binance and CEO Changpeng Zhao

The US Commodity Futures Trading Commission (CFTC) filed charges against the crypto exchange Binance and its CEO Changpeng "CZ" Zhao for allegedly violating rules around trading and derivatives. Binance is the largest cryptocurrency exchange in the world.

The CFTC has alleged that "Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to 'block' or 'restrict' customers located in the United States from accessing its platform... All the while, Binance, Zhao, and Lim, the platform's Chief Compliance Officer ('CCO'), have each known that Binance's solicitation of customers located in the United States subjected Binance to registration and regulatory requirements under U.S. law. But Binance, Zhao, and Lim have all chosen to ignore those requirements and undermined Binance's ineffective compliance program by taking steps to help customers evade Binance's access controls."

The CFTC is only one of several US groups looking into Binance, with the SEC also reportedly scrutinizing the exchange and the Department of Justice considering charges.

Developers accuse Binance of stealing their hackathon idea after Binance launches similar AI NFT product

Tweet by BNB Chain: "The grand prize winners of our third track, Lifestyle in #Web3, is the wonderful team Chatcasso 🥇

Chatcasso is a guided platform that allows users to easily and conveniently mint NFTs using only text input through the use of AI technology.

[9/11]"Tweet by BNB chain in January 2023 announcing the hackathon winner (attribution)
If you're thinking about entering into a BNB Chain hackathon, you might want to think again. On March 1, Binance announced a new "Bitcasso" product: a tool for users to create NFTs via AI image-generation.

Shortly after its launch, a group of developers accused Binance of stealing an idea they had presented at a December 2022 BNB Chain hackathon. Those developers had been awarded first place and $5,000 for "Chatcasso", a nearly identical tool.

Binance has refuted the allegations of theft, with a spokesperson acknowledging the "similarities" but claiming that "Bicasso was designed and developed independently more than two weeks before the BNB hackathon".

"It's disheartening to see a company that claims to support innovation and development steal from the very people who are working hard to build the ecosystem. Who would feel safe entering a hackathon? I don't." wrote one of the developers from the team. The developer also stated that they had not signed any contracts that would have assigned the rights to their work to the company, as is the case in some hackathons.

Paxos ordered to stop minting Binance USD stablecoin, SEC sends Wells notice

New York-based crypto company Paxos was ordered by the New York Department of Financial Services to stop minting the Binance USD (BUSD) stablecoin over "several unresolved issues related to Paxos' oversight of its relationship with Binance in regard to Paxos-issued BUSD".

Nearly simultaneously, the SEC sent a Wells notice to Paxos, informing them of imminent enforcement action. According to the Wall Street Journal, the SEC told Paxos they intended to sue the company for violating investor protection laws, and that the SEC believed Binance USD was an unregistered security.

Paxos agreed to stop minting new BUSD tokens (but will continue to honor redemptions), and said in a statement that they would be ending their stablecoin-minting relationship with Binance. As for the SEC, Paxos has promised to "vigorously litigate if necessary", arguing that BUSD is not a security.

Paxos faces investigation over stablecoin offerings

CoinDesk reported that the New York Department of Financial Services is actively investigating Paxos, which issues both the Pax dollar (USDP) and the considerably larger Binance USD (BUSD) stablecoins.

It's not quite clear the extent of the NYDFS investigation, though it joins rumors (denied by Paxos) that they were also being investigated by the US Office of the Comptroller of the Currency (OCC), which regulates banks. Paxos has a provisional banking charter, which it received from the OCC in 2021. It also has a virtual currency license, which is issued by the NYDFS.

Binance suspends USD bank transfers

Binance announced that they would be "temporarily suspending USD bank transfers" with two days notice.

This comes in the wake of various crypto exchanges — Binance included — appearing to have difficulties with banking. On January 21, Binance announced that users wouldn't be able to use SWIFT for transfers below $100,000 via Signature Bank. Meanwhile, Crypto.com's Lithuanian payment processor, Transactive, has faced a crackdown from the Lithuanian banking regulator leaving Crypto.com users without access to Euro-denominated deposits and withdrawals.

Binance announces that users won't be able to use SWIFT for transfers below $100,000

Binance informed its users that they would no longer be able to perform transactions below $100,000 via the SWIFT financial network. According to Binance, this was because their banking partner, Signature Bank, had announced they were implementing that floor for all cryptocurrency exchange clients.

Signature Bank has suggested it intends to step back somewhat from the crypto industry. It is one of the relatively few US banks that services crypto clients, and provided services to FTX among others.

Patrick McKenzie speculated that the change might have been related to AML/KYC, and Binance's "Bond villain compliance strategy".

Auditing firm cuts ties with crypto clients, deletes Binance's "proof of reserves" report they issued days prior

The accounting firm Mazars Group has ceased working with cryptocurrency clients, including Binance, KuCoin, and Crypto.com. A statement from the firm attributed their decision to "concerns regarding the way these reports are understood by the public".

On December 7, a branch of Mazars Group had published a "proof of reserves" report for Binance — though it only accounted for Bitcoin, and did not reflect liabilities for Binance's lending product. On December 9, Crypto.com also published a "proof of reserves" report that had been produced by the firm.

As of December 16, the Binance audit — which had been hosted on Mazar's website — had been deleted.

"Proof of reserves" reports have been offered by various cryptocurrency exchanges in lieu of proper audits, but have reasonably failed to reassure many customers of those exchanges. These reports do not involve the scrutiny that would be applied by a full audit — they only reflect a snapshot of assets at a point in time, and do not show a firm's liabilities.

Binance withdrawals surge due to concerns over the company's reserves

Binance, the largest cryptocurrency exchange in the world, processed at least $1.9 billion in withdrawals in a 24-hour period—considerably more than it processes in a typical day. In fact, the company briefly had to pause withdrawals of the stablecoin USDC because they needed to swap various stablecoins in order to continue to process withdrawals—something they could not do while the New York-based bank was closed.

These mass withdrawals signal concerns about Binance, whose users are looking for reassurance that the company is not engaged in similarly shady practices as their now bankrupt rival FTX. Recent news that the US Department of Justice is considering criminal charges against the company has not helped reassure customers.

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