A warning came from the former SEC lawyer as the dark clouds over the crypto industry were mounting.
U.S. Securities and Exchange Commission’s (SEC) from former lawyers John Reed According to Stark, one of the world’s largest cryptocurrency exchanges Binancemay face a “major bank crisis”.
Former SEC Attorney Warns Binance It Will Face Bank Operation
In a tweet on March 6, Stark described Binance as a “shadow bank” that issues its own counterfeit currency and also provides a range of financial services without US regulatory oversight or oversight.
My take is that Binance is a shadow bank, minting their own counterfeit currency while providing limit-order books/brokerage/custody/clearing/settlement/etc. with no US regulatory oversight or audit. It’s FTX redux and an epic bank run seems inevitable.https://t.co/ySMaG6kzQt
— John Reed Stark (@JohnReedStark) March 6, 2023
Stark’s comments came amid growing concerns from US lawmakers about Binance’s activities.
In a recent letter, US Senators, including progressive Democrat Elizabeth Warren, urged the company to turn over its records, citing money laundering and other threats.
Binance claimed innocence, denying any wrongdoing in response to the Senators’ concerns.
Now, Stark believes a bank operation is inevitable and the consequences for investors could be devastating.
He noted that unlike a traditional bank, Binance is not subject to the same regulations and does not hold deposits in the same way. Stark warned that when withdrawals are suspended, customers will be interrupted and can become unsecured creditors.
Stark pointed to previous cases where investors suffered significant losses such as FTX, Celsius, Blockfi and Voyager.
Commenting on Stark’s tweet, journalist Brady Dale argued that Binance was acting more like a stock market than a bank, while Stark disagreed, stating that a collapse in Binance could lead to a “destructive investor carnage”.
“Exchanges need mandatory oversight, audits, inspections, insurance, net capital limits, aggregation rules, licensing of individuals, and a lot of critical regulatory protection in order to function properly,” Stark said.
The cryptocurrency giant has previously defended its operations and claimed to be committed to complying with all relevant regulations.
*Not investment advice.
For exclusive news, analytics and on-chain data Telegram our group, twitter our account and YouTube Follow our channel now! Moreover Android And iOS Start live price tracking right now by downloading our apps!