Binance’s auditor spotted red flags in the exchange’s business practices years ago, newly filed evidence in the SEC’s suit against the exchange shows.
Armanino, Binance’s accounting firm, recommended the exchange stop commingling client and company funds in 2022, court declarations entered Wednesday show. The auditor made a variety of other suggestions based on “significant deficiencies” found in the business’ practices.
In a letter sent to BAM Management US Holdings in May 2022, accounting firm Armanino warned the company that keeping client and customer funds in the same bank account could create regulatory issues down the line.
“We still encourage management to fully segregate all customer assets from corporate assets as a best practice as we expect future potential regulatory requirements in this area,” Armanino wrote in the letter.
Accountants found “significant deficiencies,” across several of Binance’s divisions throughout 2019, including incorrect financial reporting, poor safeguarding of assets and insufficient custodian controls, according to a letter sent to BAM dated May 27, 2020.
Binance poorly handled data, Armanino said, and had “issues in data integrity,” court documents reveal. Armanino advised the company to provide more transparency around data collection and implement better processes to ensure accuracy.
Regarding safeguarding assets, the auditor took issue with who held bank access at Binance. “Susan (from Binance.com),” who was not a C-suite level employee, acted as the “approver of the company’s account,” court documents show.
In terms of custodian controls, Armanino suggested in 2020 that Binance “should periodically inquire and test the controls to ensure the processes at the custodian are functioning as intended and reliable.”
Armanino stopped working with all crypto clients, including FTX.US and Kraken, in December 2022 after FTX’s bankruptcy and subsequent legal troubles. Armanino had previously worked with various crypto clients since 2014.
The SEC announced charges against Binance and related companies, including Binance.US, BAM Trading and BAM Management US Holdings on Monday. The regulator alleges the exchange commingled client assets with company funds and violated US securities laws.
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Source: https://blockworks.co/news/binance-mixed-company-client-funds