• A former CEO official has warned of multiple red flags related to Binance.
  • Among the reasons cited include CFTC action alleging regulatory violations, commingling customer funds, lacking proof of reserves, and audited financials.
  • Binance argues its finances remain “way off” because the accounting profession had a limited understanding of the cryptocurrency ecosystem.
  • BNB price reacted with a 1% downswing amid the altcoin's exclusion from K33 Vinter Quality Index. 

A former Enforcement Division lawyer of the Securities and Exchange Commission (SEC), John Reed Stark, said that the future of Binance may be at risk, citing several red flags around the cryptocurrency exchange.

The red flags include a Commodities Futures Trading Commission (CFTC) action alleging the firm has violated regulatory laws. It also mentions allegations of commingling customer funds, lack of proof-of-reserves, and audited financials.”

Binance auditor quitting and the mystery of exchange’s headquarter location

Moreover, the former SEC official has also expressed concerns over Binance losing its auditor, who quit, and the supposed controversy around the company’s headquarters. In Stark’s opinion, the Public Company Accounting Oversight Board (PCAOB) did not consider Binance’s proof-of-reserves (PoR) audit, advertised as evidence of financial stability, as a reliable representation. 

Stark insists that the PoR audit is insufficient, adding that legitimate organizations would not accept it as proof of anything.

In a counter statement, Binance argues that a traditional audit of its finances remains “way off” because the accounting profession has a limited understanding of the cryptocurrency ecosystem.

CFTC enforcement action against Binance is most concerning

Nevertheless, Stark believes that the CFTC’s enforcement action against the largest exchange by trading volume is probably the most significant red flag. In his opinion:

It means that Binance has encouraged customers and employees to evade US regulations since at least 2018.

Further, Stark calls out cryptocurrency companies, Binance included, of “regulatory misappropriation” as they commandeered legitimate regulatory labels and made a fake clad of assurances with compromised integrity, legitimacy, and regulatory supervision.

Considering the many red flags and potential for more civil and criminal prosecutions relating to Binance, the ex-SEC official cautioned users having accounts with Binance to exit the platform immediately.

Binance Coin price spooked by the red flags

John Stark’s red flag comments have spooked Binance Coin (BNB) price, triggering a 1% downswing in the last 24 hours. At the time of writing, BNB is auctioning at $323.82, alongside a 33.6% drop in 24-hour trading volume.

BNB/USDT 12-hour chart

Notably, the bearish sentiment for BNB also comes as the vice president of research at K33, Anders Helseth, excluded altcoins like Chainlink (LINK), Arbitrum (ARB), and Binance Coin (BNB) from the K33 Vinter Quality Index, which criticizes value proposition of altcoins. According to Helseth, these altcoins offer uncertain value capture potential.

Binance’s BNB was flagged because its price relies on a centralized exchange’s promises to buy back and burn the token. 

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