How Binance, which trades on its own exchange and plays a number of roles that pose conflicts of interest, remains mostly unaccountable to its customers
On May 19, 2021, Francis Kim thought he had hit it big. The Australia-based entrepreneur had been dabbling in derivatives trading … Tweets: @silvermanjacob , @silvermanjacob , @bigmeaninternet , @safuunion , and @ben_mckenzie Tweets: Jacob Silverman / @silvermanjacob : Thanks to @vhranger for his insight about how trading on a crypto exchange resembles playing poker at a rigged game across from a team of pros (while the casino may shut down at any moment). Also ty for helping get “penis420” in a reputable newspaper. https://www.washingtonpost.com/ ... Jacob Silverman / @silvermanjacob : New from me and @ben_mckenzie: we took a look at Binance — the world's largest crypto exchange, a money-printing machine with no headquarters and a nomadic CEO — and why some users are suing it over a mysterious outage on May 19, 2021. https://www.washingtonpost.com/ ... Malcolm Harris / @bigmeaninternet : “We are committed to being fully licensed and regulated around the world, and we were recently awarded virtual assets service provider licenses in Bahrain and Dubai” https://www.washingtonpost.com/ ... @safuunion : “Binance itself trades on its own exchange. In traditional markets, this kind of arrangement would never be allowed, as the conflicts of interest — and potential for market manipulation — are glaring.” “No financial regulator would allow it.” https://www.washingtonpost.com/ ... Ben McKenzie / @ben_mckenzie : Fake it til you make it 🧵 https://www.washingtonpost.com/ ...
Context & Ripple Effects
Binance’s rapid expansion had already drawn global scrutiny as its previously unfettered growth met regulatory pressure. This reporting focuses that broader concern on exchange design: customers trade on a venue where Binance also occupies potentially conflicting roles.
The customer-accountability questions in this account foreshadowed the later SEC case against Binance and Changpeng Zhao and allegations concerning the handling of customer assets. The connection matters because the issue is not simply market volatility, but who controls trading, custody, and recourse when users dispute an outcome.
First-order effects
- Binance customers affected by the May 19, 2021 outage have limited recourse against a platform they allege was opaque, with some users pursuing lawsuits over the disruption.
- Binance faces intensified scrutiny of its multiple roles on its own exchange, especially where those roles create perceived conflicts with the interests of its customers.
Second-order effects
- Regulators examining Binance’s earlier unregulated-growth model gain a concrete customer-protection rationale to focus on exchange governance and asset controls.
- Competing crypto venues face greater pressure to distinguish their trading and custody arrangements from an integrated model that leaves customers questioning who is accountable.
Third-order effects
- If enforcement continues to target exchanges that combine trading, custody, and other market roles, crypto platforms will face a structural push toward clearer separation of functions and customer protections.
- The episode is part of a wider legitimacy test for crypto intermediaries: growth alone becomes less durable when users and regulators cannot readily establish accountability.
The trend: Crypto exchanges are moving from lightly constrained growth toward scrutiny of whether their market structure gives customers meaningful protection and recourse.