Five years back, in July 2017, Changpeng Zhao—aka CZ—launched Binance. Within a period of 180 days, Binance reportedly grew to become the largest crypto exchange globally. Over the years it has expanded its reigns by launching its services in a host of nations.
However, a recent investigative report by Reuters revealed fresh details about how the exchange has been dodging regulations in the US and the UK. The authors of the piece, Tom Wilson and Angus Berwick, have blamed the exchange for disarray in its compliance program.
Per Reuters, the reporting includes interviews with around 30 former employees, advisers, and business partners and a review of thousands of company messages, emails, and documents dated between 2017 and early 2022.
According to the company messages viewed by Reuters, Binance sought ways around regulatory scrutiny in the UK. Zhao allegedly signed off on a plan in 2020 by a Binance executive to backdate a company document to avoid a review of a Binance UK unit under new illicit finance rules. While discussing the plan, he reportedly wrote,
“I am fine with it.”
Furthermore, in 2018, Zhao approved a plan by lieutenants to “insulate” Binance from scrutiny by U.S. authorities by setting up a new American exchange—Binance US. Per the proposal, the new exchange would draw regulators’ attention away from the main platform by serving as a “regulatory inquiry clearing house.” Per Reuters, the company messages revealed that executives went on to set the plan in motion.
Zhao claimed that the new US exchange was a “fully independent entity.” In reality, however, CZ “controlled Binance.US, directing its management from abroad,” according to regulatory filings from 2020, company messages, and interviews with former team members.
Binance’s rebuttal
The Reuters report further went on to chalk out a bunch of other discrepancies. However, Binance published a blog penned by CZ in response to the same. He stated that one of the reporters of the piece has written “a series of stories” about Binance over the past several months, “solely from anonymous sources.” In fact, mid-year, Binance took an “unusual step” of posting their full email chain with the said Reuters reporter.
In the latest published blog post, CZ stressed that Binance was committed to compliance. Notably, since last year alone, the exchange has “hired more than 4,000 new employees, many of whom are in the compliance, investigations and security space.”
He further added,
We have been working hand-in-glove with regulators across the globe to restructure our organization and upgrade our systems. Our global security and compliance team has grown to more than 500 employees across the globe and includes professionals with backgrounds as regulators, senior investigators from distinguished blockchain analysis firms, and law enforcement agents who have led some of the largest investigations into cybercrimes.
CZ was also claimed to be an “overbearing” and “secretive” leader who “micromanages employees.” Reverting back to the same, the Binance founder said,
“I’m very transparent about my leadership style and every Binance employee has access to “CZ’s Principles,” a document that I wrote to codify my leadership style and regularly update as I learn new things.”