Per a report from Semafor, the U.S. Department of Justice (DOJ) has been weighing on the possibility of filing fraud charges against crypto exchange Binance. The company has been in the eye of all major regulators worldwide in 2023 and might be about to face its biggest legal hurdle to date.
Binance At Risk Of Bank Run?
According to people familiar with the matter quoted by Semafor, the DOJ has been reluctant to file fraud charges for fear that this could trigger a “bank run.” In other words, the authorities are allegedly worried for investors and their funds if the crypto company becomes insolvent following a massive capital exodus.
If this happens, Binance will become the second major crypto exchange to face a bank run in over a year. In 2022, bankrupt exchange FTX faced a similar situation when reports about its financial state began circulating, leaving thousands of users with their funds “stuck” on the platform.
In that sense, the DOJ authorities are looking to implement other options, such as fines or an agreement with the company, Semafor wrote. As of this writing, there is no official statement from Binance or its top executives.
The company is currently facing a legal battle with U.S. regulators. The U.S. Securities and Exchange Commission (SEC) filed a complaint against the crypto platform and its U.S. subsidiary over allegedly violating securities laws.
This has negatively impacted Binance.US market share. If the DOJ proceeds with the fraud charges, the international arm could suffer a similar fate, confirming fears of a major bank run on the platform.
On this possibility, pseudonym crypto trader “Hsaka” stated: “The same run they’ve been trying to unsuccessfully ignite for the past few months?”
As of this writing, Bitcoin and the rest of the crypto market are negatively reacting to the news with the price of top coins tumbling into critical support levels.
Cover image from Unsplash, chart from Tradingview
