The world’s largest crypto exchange company, Binance, may face DOJ fraud charges, but federal prosecutors are worried that such an action could severely impact customers and the overall crypto market.
A publication by Semafor on Wednesday, August 2, citing people familiar with the matter, reveals that the US Department of Justice (DOJ) is considering serving Binance with an indictment to add fuel to the already filed cases against the exchange by the US SEC and CFTC.
U.S. prosecutors worry Binance charges could cause run on exchange https://t.co/XRKDBLl6zR
— Ben Smith (@semaforben) August 2, 2023
However, prosecutors are mulling over alternatives as an indictment could trigger an FTX-style exchange run, causing millions of customers to lose their money and panic in the overall market. Bitcoin [BTC] and BNB tanked immediately following the report. BTC retraced back to $29,000 levels on Wednesday. Ethereum and the altcoin market felt the impact of the news.
Another FUD Around Binance?
In light of these concerns, report sources said prosecutors are considering other options, including fines and non-prosecution agreements (NPAs). This means that prosecution will be delayed in exchange for fines and compliance with certain conditions. Charges are dropped if the defendant complies with the requirements.
Prosecutors’ fears are justified given the past examples of FTX in 2022 and Lehman Brothers in 2008. The crypto market is yet to recover from the wounds of FTX. Lehman Brothers’ collapse triggered a financial crisis that nearly brought the world’s economy to a standstill. According to research firm Kaiko, “Despite the recent rally, market depth has failed to recover since the FTX collapse.”
Despite the recent rally, market depth has failed to recover since the FTX collapse. pic.twitter.com/yyb7UKTWWP
— Kaiko (@KaikoData) July 25, 2023
FTX’s collapse resulted in the death of many crypto-focused firms. Those survised are now in the crosshairs of US regulatory agencies. Another collapse of a firm like Binance would require the crypto market years to recover. Reports suggest that nearly 70% of BTC trading volume is currently coming from Binance. Catastrophe is the simple explanation in case Binance fails.
However, the crypto community is not buying the story. They believe that report is another attempt to FUD around crypto and Binance. A Twitter user Etherean Maximus wrote:
“Makes zero sense that the US gov is suddenly “worried about an exchange run” when the exchange in question isn’t even legal to use in the US.
We are supposed to believe the US gov suddenly cares about citizens around the globe?
Something smells very wrong with this report.”
Gonna go out on a limb here and say this is completely false. Makes zero sense that the US gov is suddenly "worried about an exchange run" when the exchange in question isn't even legal to use in the U.S.
We are supposed to believe the U.S. gov suddenly cares about citizens…
— Etherean Maximus ⚔️ (@EthereanMaximus) August 2, 2023
Replying to him, Rekt 1,000x said:
“That’s because Binance is propping up markets. You go after Binance and price of BTC goes to sub 10K (as an example), everyone, everywhere suffers.”
Binance is currently the top topic in crypto media. It is reported that Binance’s internal address encountered a “zero transfer scam” attack on Wednesday. The operator noted something wrong, but not before completing a transfer of 20 million USDT. Binance was able to freeze the assets in time and is now in procedure to recover these funds.
I want to share this (luckily) unsuccessful, but very clever and close scam incident from yesterday 👇. Saved $20m. Hope it may also save you one day.
The scammers are so good now they generate addresses with the same starting and ending letters, which is what most people check… https://t.co/DFpdX8aNay
— CZ 🔶 Binance (@cz_binance) August 2, 2023