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Binance: Fiat off-ramps keep closing, reports of frozen funds, what happened to Catherine Coley?
🕑 Added 2021-07-14 11:32:27 +0000 UTC
Last thing I remember,
I was running for the door.
I had to find the passage back
To the place I was before.
“Relax,” said the night man,
“We are programmed to receive.
You can check out any time you like,
But you can never leave.”
~ Eagles
Binance customers are becoming trapped inside of Binance — or at least their funds are — as the fiat exits to the world’s largest crypto exchange close around them. You can almost hear the echoes of doors slamming, one by one, down a long empty corridor leading to nowhere.
In the latest bit of unfolding drama, Binance told its customers today that it had disabled withdrawals in British Pounds after its key payment partner, Clear Junction, ended its business relationship with the exchange.
Clear Junction provides access to Faster Payments through a UK lender called Clear Bank. Faster Payments is a major UK payments network that offers near real-time transfers between the country’s banks — the thing the US Federal Reserve hopes to get with FedNow.
In a statement on its website on Monday, Clear Junction said:
“Clear Junction can confirm that it will no longer be facilitating payments related to Binance. The decision has been made following the Financial Conduct Authority’s recent announcement that Binance is not permitted to undertake any regulated activity in the UK.
We have decided to suspend both GBP and EUR payments and will no longer be facilitating deposits or withdrawals in favor of or on behalf of the crypto trading platform. Clear Junction acts in full compliance with FCA regulations and guidance in regards to handling payments of Binance.”
The Financial Conduct Authority, or FCA, ruled on June 26 that Binance cannot conduct any “regulated activity” in the UK. Binance downplayed the ruling at the time, telling everyone the FCA notice related to Binance Markets Ltd and had “no direct impact on the services provided on Binance.com.”
Binance waited a day after learning it was cut off by Clear Junction before emailing its customers and telling them that the suspension of payments was temporary.
“We are working to resume this service as soon as we can,” Binance said. It reassured customers they can still buy crypto with British Pounds via credit and debit cards on the platform.
This is the second time in recent weeks that Binance customers have been frozen out of Faster Payments. They were also frozen out at the end of June. A few days later, the service was restored — presumably when Binance started putting payments through Clear Junction.
I am guessing that Clear Bank’s banking partners warned them that Binance was too risky and that if they wanted to maintain their banking relationships, they’d better drop them as a customer asap, so they did.
Binance talks like all of these issues are temporary snafus that it’s going to fix in due time. In fact, the exchange’s struggle to secure banking in many parts of the world is likely to intensify.
Despite numerous claims in the past about taking its legal obligations seriously, Binance has been loosey-goosey with its anti-money laundering and know-your-customer rules, opening up loopholes for dirty money to flow through the exchange. Now that the word is out, no bank is going to want to touch them.
Other developments
I wrote about Binance’s global pariah status earlier this month. Since I published that story, UK high-street banks have moved to ban Binance, all following the FCA ban.
On July 5, Barclays said it is blocking its customers from using their debit and credit cards to make payments to Binance “to help keep your money safe.” Barclays customers can still withdraw funds from the exchange, however. (Since Clear Junction cut Binance off, credit cards remain the only means for UK customers to get fiat off the exchange at this point.)
Two days later, Binance told its users that it will temporarily disable deposits via Single Euro Payments Area (SEPA) bank transfers — the most used wire method in the EU. Binance blamed the move on “events beyond our control” and indicated users could still make withdrawals via SEPA.
On July 8, Santander, another high-street bank, told its customers it was also stopping payments to Binance.
“In recent months we have seen a large increase in UK customers becoming the victims of cryptocurrency fraud. Keeping our customers safe is a top priority, so we have decided to prevent payments to Binance following the FCA’s warning to consumers,” Santander UK’s support page tweeted.
As I detailed in my earlier story, regulators around the world have been putting out warnings about Binance. Poland doesn’t regulate crypto markets, but the Polish Financial Supervisory Authority also issued a caution about the exchange. Its notice included links to all the other regulatory responses.
Amidst the firestorm, Binance has been whistling Dixie. On July 6, the exchange sent a letter to its customers, saying “compliance is a journey” and drawing odd parallels between developments in crypto and the introduction of the automobile.
“When the car was first invented, there weren’t any traffic laws, traffic lights or even safety belts,” said Binance. “Laws and guidelines were developed along the way as the cars were running on the road.”
Frozen funds, lawsuits, and other red flags
There’s a lot of unhappy people on r/BinanceUS right now complaining their withdrawals are frozen or suspended — and they can’t seem to get a response from customer support either.
Binance.US is a subsidiary of Binance Holdings Ltd. Unlike its parent company, Binance.US, does not allow highly leveraged crypto-derivatives trading, which is regulated in the US.
A quick look at the subreddit’s weekly support thread reveals even more troubling posts about lost access to funds.
This mirrors Gizmodo’s recent findings. The media outlet submitted a Freedom of Information Act request with the Federal Trade Commission asking for any customer issues filed with the FTC about Binance. The agency located 760 complaints filed since June of 2020 — presumably mainly from Binance.US customers.
In an article titled “32 Angry Complaints to the FTC About Binance,” Gizmodo uncovered some startling patterns. “The first, and arguably most alarming pattern, appears to be people who put large amounts of money into Binance but say they can’t get their money out.”
Also, Binance is known for having “maintenance issues” during periods of heavy market volatility. As a result, margin traders, unable to exit their positions, are left to watch in horror while the exchange seizes their margin collateral and liquidates their holdings.
Hundreds of traders around the world are now working with a lawyer in France to recoup their losses. In a recent front-page piece, the Wall Street Journal said it suspected that the collective complaints may be the reason why Binance has received continuous warnings from many countries.
If you still have funds on Binance, I would urge you to get them off the exchange now — while you still can. When hoards of people start complaining about lost and frozen funds, it’s usually a sign of liquidity problems.
We saw a similar pattern leading up to February 2014 when Tokyo Bitcoin exchange Mt Gox bit the dust. And also just before Canadian crypto exchange QuadrigaCX went belly up in early 2019. In both instances, users of those defunct exchanges are still waiting to recoup a portion of their lost funds. Bankruptcy cases take a long, long time, and you are lucky to get back pennies on the dollar.
Finally, where is Catherine Coley?
In another bizarre development, folks on Twitter are wondering what happened to Catherine Coley, the previous CEO of Binance.US. She stepped down in May when Brian Brooks, the former Acting Comptroller of the Currency, took over. Nobody has heard from her since. Where did she disappear off to?
Coley’s last tweet was on April 19. And both her LinkedIn Profile and Twitter account indicate she is still the CEO of Binance.US.
She hasn’t been in any interviews or podcasts. She doesn’t respond to DMs, and there are no reports of anyone being able to contact her.
A Forbes article from last year says that Binance.US may have been set up as a smokescreen — the “Tai Chi entity” — to divert US regulators from looking too closely at Binance, the parent company.
Binance.US maintains that it is a separate entity. However, Forbes 40 under 40 reported that Coley was “chosen” by CZ, the CEO of Binance, which suggests that Binance is more involved with Binance.US than it claims.
Has CZ told her to stop talking? What does she know? Catherine, if you are reading this, send us a message!
