Revisiting Binance's $3.9 Billion Tether Transfer amid Compliance Accusations

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The news that caused crypto prices to falter after the recent epic run was that Binance, the leading crypto exchange, along with its CEO, recently admitted to charges of money laundering in the U.S. This admission casts a new light on the company’s activities, especially its transfer of a substantial amount of Tether (USDT) just weeks before reaching a settlement with authorities.

Binance’s transfer involved moving $3.9 billion in Tether from one of its cold wallets, Binance-Cold 2, to another wallet within its network, Binance 3. The timing of this transaction, which occurred on November 9, is intriguing given its proximity to the company’s agreement to pay a $4.3 billion fine. The Binance-Cold 2 wallet, known for holding a significant portion of the company’s assets, still retains about $6.6 billion, including $4 billion in USDT and various other stablecoins like USDD, USDC, and TUSD. On the other hand, the recipient wallet, Binance 3, now contains assets worth $3.2 billion, predominantly in USDT.

Binance moved $3.9 billion $USDT from its cold to hot wallets a few days ago.https://t.co/AY4gS9wlIS pic.twitter.com/QnnWKwChsC

— ChainArgos (@ChainArgos) November 13, 2023

The rationale behind this massive fund movement remains unclear. Whether Binance plans to utilize these funds to settle the U.S. government’s fine or convert the USDT into U.S. dollars or another fiat currency is yet to be determined. At the time of reporting, Binance had not responded to inquiries for clarification.

Stablecoins, particularly Tether, play a pivotal role in the crypto market, facilitating traders in executing transactions without engaging directly with fiat currencies like the U.S. dollar. Tether, the industry’s most prominent stablecoin, holds an $88 billion market cap, representing 6% of the global crypto market cap. However, its history is marred with controversy and scrutiny, especially from U.S. regulators. Despite past settlements and ongoing investigations, Tether has consistently denied allegations regarding its financial backing and operational transparency.

Trial and Criminal Fines for Violating U.S. Money-Laundering Laws

The recent $3.9 billion USDT transfer happened shortly before Binance and its CEO, Changpeng Zhao, agreed to a combined $1.8 billion criminal fine and an additional $2.5 billion forfeiture as part of a comprehensive settlement with U.S. authorities. Zhao, following this settlement, resigned from his CEO position. This resolution concludes a prolonged period of scrutiny by U.S. authorities into Binance’s compliance with regulatory and anti-money laundering standards.

Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.

Binance is no longer a baby. It is…

— CZ 🔶 Binance (@cz_binance) November 21, 2023

In response to these developments, Binance witnessed a significant withdrawal of user funds, amounting to nearly $3 billion. The exchange experienced a net loss of over $1 billion in customer funds within a day, though this represents a minor percentage of its total balance. This movement of funds follows the pattern observed during previous market upheavals, including the FTX collapse. Despite initial concerns of a potential bank run on Binance, the current situation seems stable. Notably, Zhao has emphasized that the U.S. prosecutors did not accuse Binance of misusing customer funds or engaging in market manipulation, critical factors in the downfall of FTX.

Not All is Bleak: BONK Coin, a Shining Light in the Darkness for Binance

Not all news is bad for Binance, though. BONK, a meme coin operating on the Solana network, has recently been a spotlight due to its increase in price. This week, BONK experienced a remarkable surge, surpassing a 25% increase in its value, as per data from CoinGecko. This spike in BONK’s value is particularly noteworthy considering the recent shifts in the crypto exchange market.

Binance has played a pivotal role in BONK’s ascent. The exchange announced its plan to introduce a BONK futures offering, named 1000BONK, along with a similar feature for PYTH, a DeFi network known for its 255 million PYTH token air drop. The decision to list these two trending Solana-based coins is a significant move, especially in light of Binance’s recent changes, including the departure of its high-profile CEO and a substantial outflow of over $1 billion.

Binance Futures will launch the USDⓈ-M 1000BONK and PYTH Perpetual Contracts on 2023-11-22 at 14:00 (UTC) and 14:30 (UTC) respectively, offering up to 50x leverage

This strategic maneuver by Binance, under the leadership of its new CEO Richard Teng, is now seen by many in the industry as an excellent market-making step. The addition of BONK and PYTH to Binance’s offerings could mark an early move in reshaping the exchange’s market position. “Binance Futures will launch the USDⓈ-M 1000BONK and PYTH Perpetual Contracts on 2023-11-22 at 14:00 (UTC) and 14:30 (UTC) respectively, offering up to 50x leverage,” announced the company, signaling its commitment to these emerging assets.

While BONK currently ranks just within the top 250 cryptocurrencies by market cap, standing at about $197 million and trading at $0.00000459, it has shown significant potential. The coin reached an all-time high earlier this week, boasting an impressive 1,700% increase. The popularity of BONK seems to be piggybacking on the broader resurgence of the Solana network, which itself has seen a notable rise in the value of its native SOL coin. SOL’s 90% increase over the last 30 days pales in comparison to BONK’s more substantial gains, positioning BONK as a standout performer in the network’s ecosystem.