28th March 2023 - Binance.

tl;dr

The lawsuit against Binance certainly qualifies for the classification of “worrying”.

Market Snap

Market Wrap

The threat of a financial crisis rumbles on - the latest suspect is Charles Schwab a key retail broker for equities. With the shares down 25% they have unrealised losses of $29 billion due to … long dated “safe and risk-free” US treasuries. It is only the regulators, who assign risk-free status to government bonds, who believe in this charade.

And up pops Andrew Bailey, governor of the Bank of England. He has claimed that the five-fold overshoot against the legally mandated target of a 2% inflation is due to a contraction in the UK workforce of 132,00 people.

What nonsense. The double-digit inflation rate in the UK is entirely due to flooding the economy with excessive liquidity, whilst at the same time closing large parts of the economy. He might not be responsible for the second of those errors, though I recall he was a supporter of lock-down, but he was definitely responsible for the first. Still, this excuse will allow for a smooth elevation to the House of Lords whilst no-one will ever take responsibility for the mess.

Occasional Series – The SNP

The CCC team extends our full congratulations to Humza Yousaf, the newly elected leader of the SNP. In his first statement in his new role he focussed on three important issues.

He has pledged to implement the Gender Recognition Reform Bill, using the courts to prosecute his views.

He has pledged to put the independence drive “into fifth gear”.

And he has said “We want to return to the EU”.

Spain will never accede to Scotland’s demand to return to the EU as an independent country.

The UK has already confirmed the first and second points are outside of his competence.

This platform of unachievable aims is going to make for very entertaining politics, at least as good as the Sturgeon charade.

Reminder – if Scotland leaves the UK, a government that is not determined by the Conservative party is extremely unlikely. Unionism is important for all of us who believe that democracy, despite its many faults, is far better than any other alternative.

Curious Cryptos’ Commentary – Now it’s the turn of Binance to face the wrath of the regulators

The CFTC (Commodities and Futures Trading Commission) has filed a lawsuit against Binance, Binance Founder Changpeng Zhao, and former compliance officer Samuel Lin. You can read it here:

https://www.docdroid.net/60YAbCz/cftc-binance-pdf#page=3

Binance is accused of operating an illegal derivatives exchange. The UK regulator had warned Binance in the past against such an operation without licensing, an impossible barrier to overcome. It is very clear that selling derivatives on any financial instrument must gain regulatory approval – derivatives demand the use of leverage, and a degree of financial sophistication lacking in most retail investors.

The lawsuit also claims that there were concerted efforts to bypass compliance controls, and, damningly, that 300 in-house accounts linked to Zhao were used for insider trading. That’s a long prison sentence right there. As we saw with the arrest of Do Kwon, architect of the massive value destruction previously known as LUNA, the feds almost always get their man in the end.

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For many years Zhao seemed almost proud of his company’s attempts to evade compliance and regulatory restrictions. The refusal to have a head office is just the most obvious of many examples of this behaviour.

In 2021 that culture appeared to be changing at Binance. Some subsidiaries worked with regulators around the world to ensure compliance with local jurisdictions. This was welcome because of Binance’s dominance amongst centralised crypto-currency exchanges. It appears that not enough has changed.

I should point out that all the allegations have been furiously denied by Binance and the individuals concerned, but we have seen this movie before.

I feel duty bound to remind everyone – do not keep more than 5-10% of your crypto stash on exchanges, and preferably spread that amongst your favourite two or three.

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One last point.

The CFTC referred to BTC, ETH, BUSD, USDT, and LTC as “commodities”:

The battle for US regulatory hegemony continues.