Binance has officially admitted to co-mingling funds and misleading investors about their one-to-one backing. What does this mean? What is the explanation for this and what are my thoughts on it? Let's get started. Finance Oh My Gosh. Binance for so long.

And this isn't to just be fun on Binance, but it's just like, seriously, again, Binance Binance who's lost their auditor? Okay, their auditor bailed for for Nobody Knows Why Okay, well I mean the company officially says that? Well, nobody really trusts our Proof of Reserves reports. Anyways, says the auditor the auditor is like, so we're just gonna stop auditing Binance auditor for Binance disappears. What do we find out today? Oh my Gosh. Apparently Binance has acknowledged that they keep collateral for some of the tokens they issue in the same damn wallet as customer funds.

Oh okay, so let me explain that because that's a little bit tricky to to Envision So let's hop on over here and just picture this for a moment. Okay, let's say you have a bucket right here and this is customer money. Okay, so that's customer money right here. and there's a hundred dollars of customer money right here.

And now let's say you print a uh B and B coin. Okay, you print the BNB coin or whatever you print and you print a hundred bucks of BNB coin and you put I don't know, 20 bucks in there of uh of collateral, right? Well, obviously if you've printed a hundred dollars of Binance token and you only have 20 actual US dollars in it, this is what's known as being under collateralized. you do not have enough money to actually provide a dollar Forever every binance token that you've created. Now, keep in mind, this is just an example.

Okay, I'm just making an example here. However, if you now just happen to put both of this money in the same bucket. Okay, and you kind of just erase these other little buckets you have here and you just happen to have customer money in the same bucket as where the binance token is that you've created or the other tokens you've created. Well, how much money do you have in this bucket now? Well, you actually have one hundred dollars of the finance token.

And how much collateral do you technically have for that binance token? Well, technically, you have a hundred dollars of customer funds and the twenty dollars of collateral you put in. So you now have one hundred twenty dollars. Which actually means, rather than being under collateralized, you are technically over collateralized and you technically have one dollar backing for every one dollar you have issued for every single token. So they are technically speaking correct in saying yeah, assets are backed one to one.

But now The Jig Is Up Now Fortunately, the crypto Market is rising because in my opinion, otherwise this would lead to a bank run at Binance. Finance Could be getting really lucky here in that they skirted by this market crash, but this is pretty shady because really, what's being acknowledged by Binance Binance admitted to this. They admitted to having customer funds in the same bucket as collateral for their tokens this comes after all of the other crazy and Shady things that have gone on with Finance Don't get me wrong, so far Finance has survived Finance has been that one company that's being treated as the lender of Last Resort As soon as I made a video and I'm not patting myself on the back, other people were talking about it too. But as soon as videos were made about their Safu fund, write their reserves fund their Insurance Fund being underfunded, they filled it back up, moved some money around.

They suggest that they're capable of buying out other crypto brokerages and they make offers. but so far they haven't closed any deals yet. But they're sending the signal of strength in my opinion, it's kind of like the emperor wears no clothes a little bit where they're sending the signal of strength well by you will by. you will buy you and when push comes to shove, they don't actually buy because they might not actually have the money which is very similar to that CNBC interview we saw which all the crypto fans and Finance fans who don't want to hear that their Binance token could be at risk or like I don't want to hear it The CNBC interview was rigged in the CNBC interview when the uh when CZ the owner of Binance was asked hey, man, could you cover two billion dollars of Demand right now He says we'll let the attorneys answer that totally Isis Multiple questions about what's going on with reserves and collateral they actually have All he says is money is backed one to one But now they're acknowledging that they mistakenly kept collateral of some of their tokens in the same wallet as Exchange customer funds.

This is a supposedly a cold wallet, but this particular wallet represents a wallet that holds reserves for almost half of the 94 tokens that Binance issues. And they were all stored in a single wallet known as Binance Eight. Now Binance. Again, they say customer assets and B tokens are backed one to one by locked Reserves But that doesn't work if those locked reserves are actually the customers.

No segregation all of a sudden makes it very difficult to actually verify how much does Binance actually have in reserves and I Hate to say it, but to the extent that the Binance token remains, you know, elevated to some level. In theory. When Binance mints more binance token, they're basically printing money like the Federal Reserve And they're able to do that as long as people believe that money is backed one to one. It's kind of like the Federal Reserve they print money and even though we had a lot of inflation here recently, we haven't had a groundbreaking like Weimar Republic style of inflation.

Don't get me wrong, there are definitely issues with Fiat currency and the federal uh Reserve but people in the world still have enough trust in the US dollar to not completely destroy it yet. At least there has been no currency that has survived in the history of currencies. But going back again to this issue with Binance, the fact that the same bucket that holds that customer collateral could be that same bucket that actually holds that one-to-one backing is pretty nerve-wracking for folks, especially since this is thought to have been that one company that was, um, uh, dare I say legit. Okay, more and more issues now coming up here.

so it's something uh to pay attention to now. Uh, Binance did come out and they did say that look, Custer all assets held on the exchange have been and continue to be backed one to one. We don't know if they're playing that one-to-one logic like I just explained in the video here. but remember, there is no FDIC insurance at Binance, There is no SI, PC, Insurance, CZ And Binance are under the Uh under multiple investigations with the Department of Justice and multiple other institutions throughout the world.

It's scary. At the same time, they meant billions of dollars of their own Binance ether, Usdc tether, you name it. And again, it's all supposed to be backed one to one. But all of a sudden we find out that they're not uh, or or at least that customer assets are sitting in the same spot apparently you've got.

It was about 40 tokens, so roughly half of the tokens that were sitting in this. see if we have some more information here. Oh, Binance now argues that assets are quote sufficiently backed in the event of a Redemption request. Okay, so now all of a sudden it looks like on one hand they're saying assets are backed one to one and now they're changing it to saying no, no assets are actually sufficiently backed.

Oh man. Obviously, after the whole FTX disaster, there's been a lot of scrutiny here. Uh, let's see, Binance has issued more than 539 million dollars in total of its 41b tokens that have Binance 8 as a collateral wallet according to calculations by Bloomberg and Based on Binance data from January 20th. While it's the wallet itself holds more than 1.8 billion dollars in related assets.

Overall, Binance 8 contains more than 16.5 billion various crypto tokens Beyond those linked to B tokens. That's that over collateralization. That means some B tokens in the wallet have far more collateral than would be necessary. For example, Binance Aid had a result a reserve of almost twenty two thousand, seven hundred percent for origin token.

Ogn on Monday Binance previously acknowledged historical issues with insufficient back-end backing for B tokens. Uh, blah blah blah. And basically now, uh, they're saying this has been solved by putting customer funds into the same bucket. So this is important to clarify.

I'll clarify it one last time and then we'll move on. But it's important to note that let's just draw it again here just to make it as as an attempt to make it as clearly as clear as possible. If you have just one dollar of one of the tokens, right? and and let's just call it the MK token. Okay, you have one dollar of collateral backing the MK token.

Uh, and I've issued Uh oh, I don't know I've issued maybe ten dollars of the MK token. Technically, I'm under collateralized, right? But if now I have customer assets of all I don't know a million dollars sitting in an account and those are customer assets and I put them in the same bucket. Well, all of a sudden it looks like I have one hundred thousand dollars or or I should say 100 000 X the backing needed to handle a collateral requirement on token MK right? It looks like I have a hundred thousand times the collateral requirement and that was actually how they ended up kind of getting Exposed on this issue is because you had crypto firms looking at this going. Dude, Why do you have so much collateral for some of these individual tokens? Ah, because it's the same collateral being used, not just for those individual tokens, but also for many other tokens and customer funds because it's all been co-mingled into the same bucket.

Now, when you look at the entire bucket in aggregate, you're actually substantially under collateralized. And this is why they're shifting their tone a little bit, saying well, yeah, on an individual basis, MK is backed one-to-one or customer assets are backed one to one. But if everyone redeemed at the same time, well, we're quote sufficiently collateralized. I Don't know? Look between you, me and the fence post here I wouldn't have any of my money on Exchange I Feel like that's That's a simple thing that folks in crypto should understand at this point that probably in a recession is the most dangerous time to actually stake your money.

Takes treasury bills at four percent or go like you know, find a platform that offers you three point, seven, five percent, or or four percent backed by FDIC or Sipc insurance. At this point, most of them actually FDIC insured. There are plenty of them. I'm not going to even mention the name because you could just Google it and there are plenty of them and you can pick your own.

Just saying. big risks over here. Now we've got to talk crypto because Bitcoin has been kicking a double s lately and it is incredible to watch what Bitcoin is doing and there's some pretty incredible things going on in the crypto. Market At the same time as Bitcoin is actually doing pretty dang well, many of us we've been seeing the trend broken on Bitcoin.

Uh, here's our downtrend bouncing off on the Fibs suggestion is that Bitcoin should be able to get right back to about 28 000. Remember that last year we saw Bitcoin sit pretty heavily between twenty eight thousand? Uh, this is the week chart over here. so we're looking at 2021 actually actually. But even over here, uh, in 2022, we saw Bitcoin sit a lot around 28 to 30k over here.

we saw that over here, there is now the belief that Bitcoin could quickly run back to about 28 000. And this is, while at the same time, we've got some wild things happening. Uh, in, well, the world of crypto. Uh, specifically, Genesis filed for bankruptcy.

Apparently the company is going or undergoing confidential negotiations with various creditor groups amid a quote unquote liquidity crunch. Uh, Genesis has, uh, you know, or a large owner of Genesis is the a digital currency group? Uh, However, so far them are creditors and Genesis have failed on any kind of restructuring agreement. Genesis uh helped fund the Gemini Earn program, which was where Gemini would basically allow their users to stake stable coins and earn a yield on them. But because Genesis is now going essentially BK uh, Gemini Oren has had to freeze withdrawals, freeze with redemptions, freeze payments and it's been a big slap in the face to that part of Gemini which has been deemed a pretty Stable Company uh in the crypto, World a lot of Institutions use a Gemini uh for the institutional uh custody of Crypto assets and so a lot of nervousness still happening in the crypto space.

yet Crypto actually overall doing decently right now. Even Ethereum is doing very, very well right now. and this is even with staking liquidity potentially coming. uh, coming pretty soon here.

Remember that one of the big fears or fun story around Ethereum was that when Ethereum goes through with its merge, which it did in about September of 2022, uh, somewhere around where where Ethereum was trading for roughly where it is now 16 to 1700. The fear was that after the merge, about six months later, stakers would be able to open essentially unlock their Ethereum accounts uh, or Ethereum coins that are staked and that could lead to a large push of Uh selling pressure, which could drive Ethereum to lows we haven't seen so far yet. What's remarkable is Ethereum so far might not end up pricing in any kind of of of large selling pressure, mostly because of what researchers on Wall Street say the Advent of and I Know this word sounds kind of funny, but Lsds Lsds are deemed liquid staking derivatives and basically think about it like a Lido. So we know that Lido is an option where people can place their Ethereum into Lido and essentially get staked Ethereum.

They could take loans against it, They can transact their stake Ethereum and essentially use Ethereum as they would if as if they were to have sold it. And so, a lot of Wall Street Uh. Individuals analyzing uh, Ethereum now suggests that maybe we won't have that large liquidation of Ethereum during uh, sort of that lock-up expiration because of Lsds. That's the liquid staking, uh, uh, derivatives.

and the liquid staking Market is up to about 33 here. I'll move my remove myself from screen here for a moment. You can see that about 33 percent of Ethereum's Holdings right now are sitting in liquid staking accounts, which reduces some of this belief that validators or those who have staked are going to dump when it becomes, uh, possible for people to liquidate out of the Ethereum 2.0 lockups. Now we have the Shanghai update which is Eip4895.

That's the next major initiative that will finally end up allowing some withdrawals from Ethereum. Uh, that was supposed to come out in May It's now expected to come out in about March There was a lot of demand, uh, for folks to at least be able to have a little bit more liquidity, because certainly there are a lot of validators who are locked up who aren't using uh, Lsds so to speak. Uh, at least not the uh, the kind we're talking about here. liquid staking derivatives, right? Uh, but uh, Ethereums.

But by the time of the merge, Ethereum had about 20 billion dollars of staked assets, 13 million staked coins locked up. Uh, that. um. since then, we've had about three million coins of Ethereum added, not taken away.

People are still adding to staked Ethereum. Uh, which is really incredible because it it indicates that maybe there isn't that much demand for liquidating Ethereum. and it's been really a good thing for the Ethereum Protocol to see that more people are staking and locking themselves up. and now we're at 16 million coins or about 13 percent of circulating Supply locked into the protocol.

Which is also important because the more you have locked up in Ethereum, the more uh, secure the network is deemed to be. Uh, so we'll see, we'll see what ends up happening here. Uh, but uh oh, You know, a lot of folks still a little bit nervous about what ends up happening in March and maybe what we're seeing now is just sort of that Rising Tide of the Crypto Market Moving up. However, if you kind of look at, uh, the uh, Ethereum staking ratio compared to competitors pretty low, look at this chart here and it'll show you that Ethereum staking level is sitting somewhere at about 13, whereas Cardano is sitting somewhere around 71 Of individuals in Cardano Estate, it's 96 of people in the Binance coin are staked Avalanche about 62 Polka Dot 45 Polygon 39 Tron 44.

So really, you have a very low level of of Uh Ethereum coins actually staked and potentially subject to those lockups in English This is a good thing that when March rolls around, maybe there won't be that massive pressure of selling or liquidating Ethereum that individuals have been fearful of. Especially since when you look at the total value locked on Ethereum contracts which is different from percent staked, we actually haven't seen it plummet. Look at it here: total value locked into smart contracts via Ethereum 68, which is the same as what we saw in 2021. Actually, really incredibly bullish for Ethereum, Uh, and and to some extent, uh, the larger portion of the crypto market, right? Ethereum at Bitcoin.

Pretty pretty incredible. Now, some other things that are pretty incredible are what I call crypto disasters like what you had with uh Sam Bankman Freed apparently and this is quite remarkable, but apparently one-third of all members of Congress actually received some kind of money from FTX via donations or whatever. Now that's pretty scary, in fact. Uh, here is uh, that article from Coindesk.

We go through that coindesk piece, we can see more than one in three of the 535 senators and representatives have received some kind of campaign support from FTX and this guy showered politicians with Money Towing Desk apparently identified 196 members of Congress the new Congress who had their campaigns funded by FTX Here's a representative from California Uh, Lou Carrera who was among dozens of current or incoming members of Congress who took FTX contributions. in this case, two thousand, nine hundred dollars, the full limit directly from Sam Bankman Freed himself. He said that he didn't know, the gentleman never talked to him and decided to or at least intends to donate that money to the university uh system the Uh California State University system to support their Dreamer Education Fund. Now, what's crazy about that is if they do that.

Basically all these charitable contributions are at risk of having their money clawed back through the FTX bankruptcy as uh as as individuals seek to recover losses at FTX. Now even though Sam Begman Freed has told us his net worth is only about a poultry one hundred thousand dollars. Somehow, about 700 million dollars of Uh of money that FTX had their hands on, uh has been claw well I should say seized by the Department of Justice. Now that's kind of interesting because how can they seize 700 million dollars from somebody who only has a hundred thousand dollars? Well, Reuters broke this down Reuters suggested that 525 million dollars of that seized money came from Robin Hood shares that were seized and then various other money came from money deposited like seven million dollars deposited at Silvergate accounts associated with Sam Bateman Freed and FDX 94.5 million dollars in cash from an account at Silvergate Bank which was associated with the FTX Digital Markets fund uh, and 50 million taken from other places even Elon Musk laughed at the idea that he only had a hundred thousand dollars.

You could see that laughing right here. Only a hundred thousand dollars left Elon Musk laughing emojis here. It is kind of incredible that this individual has had complete access to the internet and we've seen a lot of movement at Alameda Councilor Alameda Associated accounts uh, since his release back in December from custody and uh, it really goes to show how deep of a fraud this individual truly is. It's quite disgusting.

However, through these liquidations, there have become some issues. For example, some money was attempted to be liquidated by some of the uh you know, the the court appointed Liquidators and apparently they screwed up and some of the Liquidators ran into a margin call when they withdrew too much money uh from uh uh from from certain uh wrapped Bitcoin funds. Apparently Four Rap Bitcoins were liquidated when the Alameda Liquidators took too much money out of Ave In which case they were margin called and suffered a loss of seventy two thousand dollars at current prices. So in other words, Alameda Liquidators went into Ave took the money out of Ave without realizing that money was actually collateral for debt and ended up suffering a margin call and lost somewhere around 74 000 for doing so.

which is kind of remarkable that the Liquidators themselves for Alameda are getting liquidated. You just can't make this stuff up these days. It's pretty remarkable. So at the same time as all of this insanity is happening, the Genesis Bankruptcy.

these crazy liquidations, uh at Alameda the seizing of assets by the Justice Department fear over Ethereum's uh, lock up expiration so to speak. Bitcoin And Ethereum are actually doing quite dang well. It's pretty remarkable.