Billions in outflows from Binance due to SEC lawsuit, CZ (CEO) responds.

The crypto exchange Binance has seen billions of dollars leave the platform over the past week, according to on-chain data from several analytics platforms. However, Binance CEO Changpeng ‘CZ’ Zhao has argued that the situation may not be as severe as it appears and that such data can be misinterpreted.

Analytics Data Points to Large Outflows from Binance Following SEC Lawsuit

Several major blockchain analytics platforms have reported an increase in exchange outflows from Binance over the seven days following the United States Securities and Exchange Commission’s (SEC) announcement that it was suing Binance, its US legal entity BAM Trading, and Changpeng Zhao.

The lawsuit, which was filed in the District Court for the District of Columbia on June 5, alleges that the exchange violated US securities laws and put its American users at risk of an unsafe trading environment due to a weak Know Your Customer (KYC) process.

Blockchain analytics firm Nansen has reported an outflow of $2.36 billion from Binance, with $123.7 million flowing from Binance.US over the past week. DefiLlama puts the figure even higher, reporting $3.45 billion in outflows from Binance. Data from Glassnode shows that the exchange’s Bitcoin balance has taken a 5.7% hit over the same period, declining by $1 billion.

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CZ Responds to News of Large Outflows

Following reports of increased outflows after news of the lawsuit broke, Binance CEO CZ argued that there was potential for on-chain data to be misinterpreted. In a Twitter thread on June 10, the CEO stated that some third-party analytics measure change in assets under management (AUM) as “outflow”, including during times when crypto prices dropped. He explained that crypto price drops decrease AUM and some platforms measure this as “outflow”. The exec added that some platforms only measure outflow and not inflow. He went on to state that large inflows and outflows were to be expected during periods of market volatility.

According to our data, last 24hrs, @Binance net outflow is about $392m.

Our wallet addresses are public. Some 3rd party analytics measure Change in AUM (asset under management) in USD equivalent as outflow. This would include crypto price drops (which decrease AUM) as “outflow”….

— CZ 🔶 Binance (@cz_binance) June 10, 2023

“Some even only measure outflow, not inflows. On a sharp price movement day like today, many arbitrage traders move a lot of funds between exchanges, usually exponentially more than on normal days,” added CZ.

The day after filing 13 charges against Binance and CZ, the SEC went on to charge major crypto exchange Coinbase for allegedly “operating as an unregistered securities exchange, broker, and clearing agency”. According to CoinGecko data, the total crypto market capitalization has declined by 7% (over $80 billion) since news of the two lawsuits broke.