The crypto industry was hit by a double whammy over the weekend from the Wall Street Journal.

First, the paper published a report on Friday that accuses Tether, the world’s biggest stablecoin, of using false documents to open bank accounts. On a conference call, Phil Potter, Tether’s former chief strategy officer, allegedly referred to “cat and mouse” games played by crypto players to get around problems in accessing mainstream banking services.

And what were those games?

Presenting fake invoices and contracts for deposits and withdrawals, opening multiple company bank accounts in the name of various executives and tweaking company names. The Journal alleges that the bank accounts were used to transfer money by criminals.

Crypto Capital Corp., a shell company that was also mentioned in an NYDFS charge sheet against Tether, made a re-entry in the reporting. WSJ writes that Crypto Capital opened a network of bank accounts that worked as an “unlicensed money transmitting business for crypto companies.” This means that Tether was not the only user of this entity; it was also used by other companies operating in the ecosystem.

Binance and Binance.US: One Entity  

This morning, the publication published another report about Binance, the world’s biggest cryptocurrency exchange by trading volume, and its alleged links to Binance.us, a US-based exchange that claims to operate independent of its parent.

The report mentions text messages between executives at Binance.us and its parent entity as proof. In one, the CEO of Binance.US, Catherine Cooley, asks staff to send their progress update to her early so that she can pass them onto Binance’s CEO and CFO the next day. The two companies also shared software developers, the Journal alleges. One at the parent company accidentally “turned on” trading for the US exchange before its time.    

To be sure, this is not the first time that the relationship between Binance and its US operations has been questioned. A separation of operations between the Binance and its US subsidiary helps the company operate in the United States without attracting the scrutiny from regulators on Binance.com. The main exchange is supposed to function as a Wild West for crypto, listing illiquid cryptocurrencies and trading products that help criminals launder money across borders.  

A Tsunami in Wait

The waters recede before morphing into giant waves during a Tsunami. And, so it might be for cryptocurrencies.

It is no coincidence that crypto’s biggest stablecoin and its biggest exchange have remained impervious to recent scandals in its ecosystem.

Tether functions as a central bank of sorts for crypto, controlling bitcoin price through its supply. Its imprints are everywhere – whether in the form of loans or investments or, even, in shady banking relationships. And yet, in an ecosystem of connected balance sheets where dominoes fall daily, it seems to be the sturdiest one standing.  

Tether announced last week that it had no exposure to Silvergate Bank, the bank that unraveled because of its exposure to cryptocurrencies. It had invested in and provided a loan to Celsius network, the crypto lending firm that collapsed last year, but said it was unaffected.

Even the crash of FTX, an exchange that enabled conversion of Tether to US dollars and had a trade to short the stablecoin, failed to produce a ripple in Tether’s balances. In fact, BUSD’s planned demise has helped it garner more market share and trading volume, increasing its crypto dominance.

Binance is in a similar boat. The crypto exchange has remained unaffected by the turmoil in crypto and continues to remain the world’s biggest exchange by trading volume. This is the case even though most of its operations, and the source of its trading volumes, remain a mystery. To boost its profile, the company has repeatedly attempted to steer the rudderless crypto ship. But it has failed to bring order.

However, it might only be a matter of time before the two crypto giants find themselves in regulatory pincers. The signs are already there, whether it is talk of Tether’s payment processors or about the owners of FTX holding a stake in multiple entities or Binance CEO Changpeng Zhao’s (CZ) investments in market makers. The steady drip of reporting about the two companies is building up towards a giant wave that will destroy crypto.