Binance Faces Potential U.S. Fraud Charges: Concerns Over Risk of Bank Run Loom
Author: Clara Lawson
- August 2, 2023
Crypto exchange Binance is under scrutiny by the U.S. Department of Justice for potential fraud charges, as reported by Semafor. The news had an immediate impact on the prices of bitcoin (BTC) and Binance’s BNB token, causing a decline in their values.
According to sources familiar with the matter, U.S. officials are cautious about pursuing an indictment due to concerns over triggering an FTX-style bank run. As a result, they are considering alternative measures such as imposing fines or entering into deferred or non-prosecution agreements.
Semafor further reports that the Justice Department is apprehensive about the broader implications such an indictment could have on the cryptocurrency industry. The fear of endangering the stability of the industry is prompting them to explore less drastic options.
Binance has refrained from providing any comments on the matter, while the Justice Department is yet to respond to inquiries made by HowisCrypto.
This development is not entirely surprising as Binance has been under regulatory scrutiny in the U.S. Earlier, the Commodity Futures Trading Commission (CFTC) took legal action against the company’s founder and CEO Changpeng “CZ” Zhao for allegedly evading U.S. laws.
The reluctance to pursue legal action against Binance is influenced by the memory of the collapse of FTX, which had severe consequences for the crypto markets, causing a loss of billions of dollars and impacting the reputation of the industry. The concern over a systemically important institution’s downfall, like Lehman Brothers in 2008, leading to a wider financial crisis also weighs heavily on the decision-making process. Binance holds the position of the world’s largest cryptocurrency exchange, adding to the complexity of the situation.
