The world's largest cryptocurrency exchange, Binance, has been accused of mixing customer funds with the company's revenue in 2020 and 2021, violating US financial rules that require customer funds to be kept separate, according to Reuters.
The mixing happens almost daily in accounts held at the US-based crypto-friendly bank Silvergate. The amount is believed to be in billions of dollars, according to an insider with direct knowledge of the Binance team's finances.
Reuters has not verified the exact number or frequency. However, a Reuters review of bank records dated February 10, 2021, shows that Binance mixed $20 million in corporate funds with $15 million from a customer-receiving account.
Three former US regulators said the cash flow at Binance described by Reuters showed a lack of internal controls to ensure customer funds are clearly identified and separate from the company's revenue.
They said mixing the funds put clients' assets at risk by concealing their whereabouts. John Reed Stark, former director of the Securities and Exchange Commission's Office of Internet Enforcement.
However, Reuters found no evidence that Binance customer funds were lost or taken.
A spokesperson for Binance, Brad Jaffe, denied mixing customer deposits and company funds.
Binance has come under strict regulatory scrutiny from regulators in the United States. In March, the US CFTC sued Binance and CZ for violating commodity laws and operating an illegal derivatives exchange. The DOJ is also investigating Binance for a number of issues, including sanctions violations against Russia.
SEC Chairman Gary Gensler previously said that many crypto exchanges fail to comply with the law requiring registered broker-dealers to separate client funds from company assets.
The SEC has launched enforcement actions against many crypto companies and exchanges but has not taken any action against Binance.