On Monday, the US Securities and Exchange Commission took aim at the most powerful man in crypto.
The SEC accused Binance founder Changpeng Zhao of running a “web of fraud”, accusing him and his exchange of 13 crimes.
These ranged from allegedly manipulating Binance’s trading volumes and failing to ban US customers from its unregulated platform, and mixing and diverting billions of dollars in customer funds “to do as they please”.
The complaint further threatens Zhao’s vast business empire, which has dominated the crypto industry for years. The billionaire tycoon is already facing charges from the US Commodity Futures Trading Commission filed in March, and his exchange is also under investigation by the Justice Department.
Zhao’s vast ambitions are now coming up against concerted efforts by US regulators to rein in a company which he alleges has grown to an enormous size by systematically evading US laws.
In response to the SEC’s allegations, Binance said: “We intend to vigorously defend our platform,” adding that “because Binance is not a US exchange, the SEC’s action is limited in reach.” Binance said that any allegations of putting user assets at risk are “false.”
Ever since he launched Binance in Shanghai in 2017, Zhao has dreamed big. “We want to capture the whole market!” he told employees in a company chat group that year.
The 46-year-old CEO didn’t waver in his beliefs as he built his crypto exchange. This year, Zhao felt a bigger goal was almost within his grasp: a seat at the top table of finance.
“The idea that a five-year-old start-up could mature and operate on the same level as a financial institution has been around for 200 years,” the billionaire wrote in a review last January.
“But we’re almost there today.”
That dream now seems to be fading away after the SEC’s action.
In its 2022 review, Binance commends its progress in complying with regulations around the world. The exchange had strived through the year to strengthen client checks, while developing crypto’s “best security and compliance team”.
But according to the SEC, Zhao and Binance “intentionally chose to evade” US laws “in an effort to maximize their own profits.” It “put its customers and investors at risk,” the SEC alleged, citing several practices first reported by Reuters in a series of investigations into the exchange published this year and into 2022.
“Zhao and the Binance entities engaged in a widespread web of deception, conflict of interest, lack of disclosure and calculated evasion of the law,” said SEC Chairman Gary Gensler.
The US Justice Department is probing Binance for alleged criminal sanctions violations and money laundering, Reuters reported in December, with some prosecutors believing they have enough evidence to indict Zhao and other top executives. There are proofs. Binance said at the time that it had no knowledge of the inner workings of the DOJ.
Zhao ‘no one to answer’
Zhao was born in China before moving to Canada in 1989 when he was 12, two months after China’s crackdown on pro-democracy protesters at Tiananmen Square, he wrote in a blog last year.
The tycoon, known by his initials CZ by his employees and online followers, traversed the globe in search of success, working in Tokyo and New York before moving to Shanghai, where he embraced crypto and founded Binance in 2017. established.
Its expansion was dramatic.
According to research firm CCData, Binance became the world’s largest crypto exchange within six months, and now accounts for nearly 60% of global crypto trading volume. However, the exchange has repeatedly refused to disclose where its trading platform is located.
From the company’s early days, Zhao maintained a firm grip on Binance as a powerful leader committed to privacy and focused on market domination, a Reuters report last year found.
Zhao established a tight circle of associates in top jobs, many of whom had worked or studied in China. Co-founder Yi He now runs Binance’s $7.5 billion venture capital arm, as well as other key departments. Zhao tasked Guangying Chen, the Chinese-born head of the back office, with managing the company’s finances. This included a series of accounts that Binance had opened at the now-defunct US lender Silvergate Bank, Reuters reported last month.
In one of these accounts, held by a trading firm called Merit Peak, which is controlled by Zhao, Binance mixed client funds with corporate revenue and used money to buy crypto tokens pegged to the exchange’s bespoke dollar. Used, Reuters found. The SEC also alleges this in its complaint.
Reuters reported on Monday that Chen also operated bank accounts belonging to Binance.US, an allegedly independent affiliate of Binance, ensuring that Zhao could direct the company’s expansion into the US crypto market as well.
Although Binance has hired extensively from the traditional financial and regulatory world in recent years, Zhao continues to have tight control over his company. The company, which calls itself an “ecosystem”, has established at least 70 entities, most of which are personally controlled by Zhao.
“Zhao answers to no one but himself,” the CFTC said in its March complaint.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,