Things aren’t looking great for Binance.US. The SEC is accusing it of noncooperation and questioning the ownership of its custody provider, and more reasons to not trust centralised platforms blindly.

Don’t blindly trust centralised exchanges part 1. Binance news. Binance vs the SEC. And who custodies Binance.US ?

SEC vs Binance.US: ‘unintelligible screenshots and documents without dates or signatures’ – Binance.US accused of noncooperation

The SEC has accused Binance.US of noncooperation in its ongoing investigation. Binance.US’s holding company, BAM, has produced only 220 documents, many of which the SEC claims “consist of unintelligible screenshots and documents without dates or signatures”. The SEC also reportedly says BAM has refused to produce essential witnesses for deposition.

None of this has helped Binance’s trading volumes. Trading on Binance.US tumbled to new lows this month. Trading volumes this month hit a low of $2.97 million, compared to the same period in 2022 when this figure was around $230 million.

Binance.US and its custody provider Ceffu claim to be separate. Ceffu’s website and the SEC aren’t so sure

One of the questions surrounding Binance.US is the ownership of its custody provider. Here’s what we know:

1. Binance.US uses a custody provider called Ceffu. When Ceffu was launched in December 2021, it was called Binance Custody. In February this year, it rebranded to Ceffu, the name inspired by crypto term SAFU, meaning safe as…
2. Ceffu is claiming no relation to Binance. It is “factually incorrect” that Ceffu was provided by Binance and Ceffu is a “fully independent third-party technology service pro”, according to a Ceffu spokesperson who didn’t identify themselves. An unnamed Ceffu spokesperson also said that “Ceffu is not a Binance entity” and that “Prior to rebranding in February 2023, our entity was always run independently from Binance activities, and thus fully separate from Binance.”
3. In its T&Cs, Ceffu is known as Bifinity UAB. Bitfinity is listed on Binance’s website among the regulatory recognitions that Binance holds. A November 2022 SEC filing also describes Binance CEO CZ as Bifinity’s sole shareholder, and says that two of Bifinity’s three board members worked for Binance. A June affidavit filed by the SEC says Ceffu is still ultimately owned by Zhao (CZ).
4. Binance.US, in a Sept. 12 legal filing, has said that Ceffu is merely the market name of wallet custody software that Binance Holdings developed and licensed to the U.S. arm.
5. Of course, it is possible that after the Feb 2023 rebrand, Ceffu broke clean and is now a totally independent company, but if this is the case, that isn’t made clear anywhere. A spokesperson for Ceffu wouldn’t discuss its current ownership or management.
6. The SEC is trying to ensure that American users’ assets won’t be taken out of its custody and sent overseas to a less friendly jurisdiction before judicial proceedings against Binance conclude. Not an unfair concern, given how many centralised crypto exchanges have separated their users from their money.
7. The SEC has expressed concern that Binance.US’ use of Ceffu breaches a previous legal agreement aiming to ensure that only US staff are able to access funds. This agreement permits Binance.US to use third-party US-based custody providers but prohibits it from using any other entity affiliated with Binance or CZ for custody, as per documents it filed in August and unsealed in September.
8. Lawyers are now arguing over whether Binance.US is a client of Ceffu or if it’s all part of the same CZ owned shell.
9. Obviously, this is crypto, so it could all change at any minute.

Some Binance.US documents might soon be made public

The public might/ should soon be able to see at least some of the sealed documents in the US SEC’s case against Binance. The documents had been sealed at the SEC’s request, a decision Binance was happy with. They’re now being unsealed at the SEC’s request. The SEC’s case against Binance.US, Binance and CEO CZ revolves around claims of unregistered securities operations and other improprieties, including wash sales. Included in the documents to be unsealed are internal Binance.US documents, emails, and SEC court filings. One expects the documents won’t be complimentary towards Binance.

Binance: CEO CZ responds to rumours that US executive is ‘taking a deserved break’

Binance Holdings CEO CZ is talking down speculation surrounding the (relatively sudden) departure of Binance.US CEO Brian Shroder. CZ claims Shroder is “taking a deserved break” after a successful stint at Binance’s US subsidiary. Possible. Realistically, he’s one of the several who have left as regulators turn on the exchange. Binance.US has seen an exodus of top executives who have left amid lawsuits from the US SEC and the CFTC. In a Sept. 15 post via X (what is a new X version of a tweet called?) CZ tried to get people to “ignore FUD” around the recent shuffling of execs. Two days before, Binance.US announced it was laying off a third of its staff. The day after, its head of legal and chief risk officer announced their departures, fueling further speculation that Binance may be facing worse troubles than it’s letting on.

Don’t blindly trust centralised exchanges part 2. FTX news. SBF did what he ‘thought was right’ by separating his users from billions of their funds?

Sam Bankman-Fried: ‘I did what I thought was right,’ in leaked docs 😬 🤦‍♀️

Former FTX CEO SBF, currently in prison facing multiple criminal charges related to alleged misuse of user funds, reportedly denied many of the allegations against him in documents containing a draft of a Twitter thread he never posted.

“There will probably never be anything I can do to make my lifetime impact net positive,” said Bankman-Fried, according to the report. “[T]he truth is that I did what I thought was right.”

The human capacity to self-justify is immense. One isn’t sure that the thousands of businesses and individuals who have lost billions of dollars—and in many cases, life savings and livelihoods—to his supposed doing ‘right’ would agree.

Sam Bankman-Fried’s Parents May Have Been More Involved in FTX Than We Thought

SBF’s parents, Stanford law professors, had maintained they’d had minimal involvement with the exchange, other than the minor issue of the tens of millions of dollars and property they ended up with.

They had said that his mother, Fried, had never worked for FTX, and his father, Bankman, had only worked for the company briefly and mostly dealt with philanthropy.

According to new reporting that totally goes against these claims, former FTX employees and partners indicate his parents had far greater involvement. Legal filings also show their influence, connections, and perceived credibility were instrumental to FTX’s success. SBF’s parents were also reportedly frequently in the FTX office, with Bankman reportedly serving as SBF’s go-between for employees and business partners.

It isn’t going to help their case that his parents got $26 million in cash and real estate in 2022 alone from the now-failed exchange. Public records list a $16 million beachfront condo by FTX’s Bahamian headquarters as Bankman and Fried’s “vacation home.” Court documents also say that SBF used FTX funds to give his parents a $10 million cash gift, which was never returned. Bankman and Fried say this is needed to pay their son’s legal bills. Lesson: don’t trust centralised platforms blindly, even if their founders have outwardly credible parents.

Don’t blindly trust centralised exchanges part 3. Celsius news. A guilty plea

Celsius’ Former Chief Revenue Officer Pleads Guilty to Fraud and Price Manipulation

Things aren’t looking up for bankrupt Crypto lender Celsius. Its former Chief Revenue Officer Roni Cohen-Pavon has just pleaded guilty to charges relating to fraud and price manipulation of digital assets, from which he is said to have made roughly $3.6 million. The charges stem from allegations that former CEO Alex Mashinsky artificially inflated the price of the Celsius token. Mashinsky made himself about $42 million from the efforts. Mashinsky has pleaded not guilty to all charges and is currently free on a $40 million bond.

Don’t blindly trust centralised exchanges part 4. Exchange hikes withdrawal fee. To $999.

Crypto exchange JPEX charges users $999 to withdraw their funds after being outed for not being regulated

In a case of crypto cryptoing, a crypto exchange got a warning from Hong Kong’s Securities and Futures Commission for allegedly promoting its services to the HK public despite not being licenced to operate in the jurisdiction. Despite this, JPEX, the exchange in question, had marketed itself on its website as a licenced platform. This in itself, wouldn’t be news, so much as a regular occurrence.

Instead of just ceasing trading, JPEX reportedly took matters into its own hands. The exchange, at the time, was mid-exhibiting at Token 2049 in Singapore, a pretty major crypto event. On hearing the news of the warning, the team reportedly just got up and left, abandoning their booth. That also isn’t anything too out of the ordinary for crypto.

What is less ideal for its users are the measures the exchange took to prevent anyone from withdrawing their funds when it was caught out. It raised its withdrawal fee to 999 USDT ($999). Basically charging people a grand to get their money back. The adage about not your keys, not your coins about centralised platforms still stands.

Don’t trust anyone part 1. North Korean hacks are down, for now.

North Korean crypto hacks down 80%, but that could change anytime

North Korean state sponsored hacking groups have long been behind a high proportion, if not the majority, of crypto hacks. Crypto hacks are currently down 80%, according to a Chainalysis report. This is good, except it doesn’t necessarily mean that crypto security has suddenly improved or that North Korea has stopped hacking. It could also all change overnight.

So far this year, North Korea-linked attacks have accounted for (only) about 30% of all crypto funds stolen in hacks. One of the reasons for this drop is that North Korean hackers have become increasingly reliant on certain Russian-based exchanges to launder their stolen crypto funds. Many of the Russians behind illicit exchanges (and ransomware) have been forced into the war, meaning they can’t service their money-laundering or ransomware operations. This has reduced global ransomware, and evidently hindered North Korean laundering efforts.

Hence, “The fact that this year’s numbers are down is not necessarily an indicator of improved security or reduced criminal activity,” according to Chainalysis, whose VP of investigations, Erin Plante says:

“With North Korean-linked hackers in particular, sophisticated social engineering tactics that take advantage of the trusting and carelessness of human nature to gain access to corporate networks has long been a favored attack vector. Teams should be trained on these risks and warning signs”

It’s thought that North Korea is using the funds to support its nuclear missile programme.

The market is hitting R3

Blockchain Company R3 Lays Off 20% of Staff

Blockchain provider R3 has reportedly laid off 20% of its workforce across different functions to preserve cash. The platform says it is continuing to invest in digital currency solutions and is focusing on accelerating its work with financial firms on digital assets and tokenisation solutions, which are currently seeing an upturn. It mentioned the slow adoption of blockchain by financial institutions, on which the company had focused, as being behind the changes.

And for some good news

Japan to allow startups to raise funds by issuing crypto instead of stocks

The Japanese government is planning to allow start-ups to raise public funds by issuing crypto assets, instead of stocks, according to local media.

German Finance Heavyweights Develop Fully-Insured Crypto Staking Offering, Plan 2024 Release

Boerse Stuttgart Digital, The crypto arm of the Stuttgart Stock Exchange, Boerse Stuttgart Digital, is planning to introduce a fully insured cryptocurrency staking service next year. It will work with reinsurance provider Munich Re on the offering. This is the latest example of traditional financial institutions entwining their services with crypto offerings. Germany’s largest lender Deutsche Bank is working with Taurus on digital asset custody and tokenisation, and HSBC is partnering with crypto custody firm Fireblocks.

US lawmakers advance legislation blocking the digital dollar

Finally, some good news! The US House Financial Services Committee is trying to push through legislation to prevent the issuance of a central bank digital currency. On Sep. 20, it will put forward two bills to block a potential digital dollar in the US. Its Digital Dollar Pilot Prevention Act aims to prohibit the Federal Reserve from initiating pilot programmes to test CBDCs without approval from Congress. At least a few people are seeing the inherent dangers to humanity of central bank digital currencies. If CBDCs do go through, citizens will wave goodbye to privacy or freedom. The concept of CBDCs is bad. CBDCs are real-life 1984 being played out now with your money.

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