Attorney John Deaton, a managing partner of Deaton Law Firm, said he believes Binance's assertion that it backs all of its users' funds 1:1 is truthful because the government would have discovered it if it wasn't during its investigation into the company. He presented his perspective in a video on November 28, pointing out the contrast between Binance's and failed crypto exchange FTX's situations.
"I’ve got to believe that that is accurate, because if it wasn’t, the government would’ve forced CZ to something else - there would’ve been fraud involved. Instead, CZ agreed that he violated the Banking Secrecy Act and dealt with a sanctioned country. That doesn’t mean that CZ actually laundered money, it just meant that he didn’t have the procedures in place to protect from others possibly laundering money. …That’s very different than FTX and SBF, where they took the customer money and they paid for real estate and they paid for everything else, political donations and all of that," said Deaton.
According to a CryptoLaw post on X, Deaton said a key difference between Binance and FTX is that "CZ made himself available," allowing government agencies to examine Binance's books and cooperating fully with the investigations according to the video. He said that at the conclusion of the investigation, the U.S. Departments of Justice (DOJ) and Treasury along with the Commodity Futures Trading Commission did not accuse Binance or CZ of misappropriating users' assets.
Binance reached a settlement with DOJ on Nov. 21 over historical compliance issues, according to a DOJ press release. As part of the resolution, Binance agreed to pay $4.3 billion in penalties and will allow a third-party monitor to have access to its transactions and accounts. CZ agreed to step down from his role of CEO and plead guilty to failing to maintain an effective anti-money laundering (AML) program.
A jury found FTX’s Bankman-Fried guilty on Nov. 2 of seven criminal charges, including wire fraud, conspiracy to commit wire fraud, and money laundering, The Block reported.
Bankman-Fried had risen to celebrity status living in a $35 million penthouse before his crypto company collapsed in November 2022 NPR reported. FTX customers started withdrawing their funds in November after seeing red flags about the financial health of the exchange leading to an effective bank run that revealed FTX was not holding customers' money in full. FTX and its associated hedge fund Alameda Research filed for bankruptcy on Nov. 11, 2022, and Bankman-Fried was extradited from the Bahamas one month later.
FTX customers reportedly had approximately $16 billion in funds on the exchange prior to its collapse and the company's new management has recovered $7.3 billion that can be put towards paying customers back. An analysis conducted by Wall Street Journal in October found that customers are unlikely to be repaid in full because FTX insiders spent the other $7.7 billion. Approximately $5 billion in misappropriated customer funds went towards investments in tech companies, according to the analysis. FTX insiders spent almost a quarter-billion dollars on real estate in the Bahamas and another $86 million went to political and charitable donations. Executives including Bankman-Fried received a total of more than $2 billion in payments, many of which came from personal loans that were never repaid. The analysis found that approximately $1 billion is still unaccounted for and may have been used to fund bets at FTX's associated hedge fund, Alameda.
Fortune reported that unlike FTX, Binance will be able to continue its operations in the wake of the settlement.