John Reed Stark also compared the exchange to the bankrupt FTX trading platform

​Former SEC employee calls Binance a “shadow bank”

07.03.2023 - 07:15

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2 min

What’s new? Former SEC attorney John Reed Stark on Twitter called the Binance crypto exchange a “shadow bank” that issues its own fake currency and provides services without oversight or auditing by US regulators. Stark’s comments came amid growing concern among lawmakers about Binance’s business. US senators, for example, demanded that Binance provide documents about its operations, calling the company a “hotbed of illegal financial activity.” Binance dismissed but did not directly deny the politicians’ concerns.

What else did Stark write? The former SEC attorney compared Binance to the bankrupt FTX exchange, saying that its collapse also seems inevitable.

Journalist Brady Dale commented on Stark’s statement, saying that Binance is acting more like an exchange than a bank. Stark disagreed, stressing that the collapse of Binance could lead to a “devastating investor carnage.”

The former SEC attorney pointed to the bankruptcies of crypto platforms such as FTX, Celsius Network, Blockfi, and Voyager Digital when investors suffered significant losses.

“In order for exchanges to run properly, they need mandated oversight, audit, inspection, insurance, net capital limits, commingling rules, licensure of individuals, and a vast array of critical regulatory protections,” Stark said.

Earlier, SEC Senior Trial Attorney William Uptegrove said that the regulator’s staff believes Binance.US is an unregistered securities exchange.

Binance chief strategy officer Patrick Hillmann said in February that the exchange expects to pay fines to settle an investigation into its activities by the US authorities. He said that the company is working to close compliance gaps but expects regulators to impose fines for past violations.

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