How Binance, which trades on its own exchange and plays several roles that may 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: @mrmadwhips , @bigmeaninternet , @silvermanjacob , @safuunion , @ben_mckenzie , and @silvermanjacob Tweets: Anthony Carbone / @mrmadwhips : “Binance is not just an exchange where people can buy and sell crypto. The company, whose valuation some employees claim may be as high as $300 billion, is practically its own vertically integrated crypto economy” 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/ ... 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/ ... @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/ ... 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/ ...
Context & Ripple Effects
This investigation lands a year after the Wall Street Journal flagged that Binance's unfettered, unregulated growth was coming to an end amid global scrutiny, with sources valuing it near $300 billion if it went public. The Post's reporting fills in what that scrutiny was pointing at: an exchange that trades on itself, acts as custodian, market operator, and participant at once, and answers to almost no one when outages like the May 19, 2021 derivatives crash wipe out traders such as Francis Kim.
First-order effects
- Customers like Kim who sued over the May 2021 outage face an exchange with no meaningful accountability mechanism — their recourse is litigation against a company whose multiple roles make independent verification of its trading nearly impossible.
- Binance's response is regulatory arbitrage in plain sight: touting virtual asset service provider licenses in Bahrain and Dubai while resisting the kind of oversight that would force it to separate its trading desk from its exchange.
Second-order effects
- Rival exchanges are pushed toward the opposite posture — segregating customer funds and publishing proof-of-reserves-style assurances become competitive differentiators once Binance's conflicts are public knowledge.
- Regulators gain a documented roadmap: the Post's catalog of conflicting roles prefigures the SEC's later allegations that Binance and Binance.US redirected $12B+ in customer assets to entities controlled by CZ between 2019 and 2021.
Third-order effects
- If the pattern holds, the vertically integrated crypto economy Anthony Carbone describes — one company as exchange, market maker, and custodian — becomes structurally untenable, forcing the industry toward the separated functions traditional finance requires.
- The SEC's suit against Binance and Changpeng Zhao shows where this ends for unaccountable offshore giants: enforcement replaces self-regulation, and licensing jurisdictions like Bahrain and Dubai become the new battleground for legitimacy.
The trend: Crypto exchanges are being forced from opaque vertical integration toward separated, regulated market structures, with enforcement actions converting investigative reporting into legal exposure.