Binance is the largest crypto exchange platform in the US owing to its large number of users and investors within the US. The firm has been performing well in the past up until the US agency CFTC(Commodity Futures Trading Commission) filed a lawsuit against the crypto giant. The crypto exchange, which is also the largest in the world is being sued for running a sham operation within the US. The CFTC claims that Binance is operating illegally within the country and that it has violated a lot of laws. The US authority has also issued a subpoena against the CEO of the firm as the agency claims that the firm is not registered with regulators and therefore, breaching a lot of regulations. The is also accused of facilitating terrorists in transfer of assets, funds and value, an allegation that could see more federal government agencies join the lawsuit.
Since the lawsuit was announced, the exchange has seen its investors pull out a whooping $1.6 billion from the trading platform. The Exchange has experienced an average withdrawal of $385 million daily over the last 2 weeks. However, during the past 24 hours, the figure has risen to $852 million leaving the firm’s future uncertain. While confirming this, research analyst Martin Lee also claimed that this is however not the largest withdrawal that the exchange has seen. In December last year, investors pulled out $3 billion as the firms reserves were brought to question. This trend is set to continue as investors are rushing to protect their assets and only time could tell the amount of damage lurking in the near future.
However, signs of trouble have already started brewing as the firms stablecoin reserves have plummeted by 65% in the wake of this legal action. This forms part of the ongoing crackdown in the crypto industry as more action is expected soon. The SEC(Securities and Exchange Commission) is already preparing a lawsuit against Coinbase and celebrities who endorse crypto products. Binance has been in operation since 2017 and accounts for the largest trade volume in crypto globally. The US regulations demand that any company that trades in exchanges or conducts similar operations must first register with CFTC, according to the prosecutor’s arguments. The lawsuit is still in its early stages but as the situation unfolds, we will keep you informed.
Author’s Sentiments
The crypto community has its own anticipation on the current quagmire that Binance is facing. Some are speculating an untimely collapse and they won’t be wrong. It is important to note that when withdrawals exceed the liquidity of a firm, the firm has to declare bankruptcy. Again, the firm’s reserves might not be enough to pay off investors who did not get a change to liquidate their assets leading to the ultimate collapse. This is what led to the collapse of the Silicon Valley Bank. In such situations, one trigger that raises concern from investors is enough to kill a firm. What is your take on authorities triggering failures in firms? Leave your opinion in the comment section.
