As a long-term crypto investor who has closely followed the developments surrounding Binance and its former CEO Changpeng “CZ” Zhao, I’ve been both shocked and disheartened by the series of investigations and legal actions that have unfolded over the past few years.
In a Seattle courthouse on April 30, Changpeng “CZ” Zhao, the ex-CEO of Binance, was given a four-month prison sentence due to his breach of U.S. money laundering regulations, after prolonged probing by American law enforcement agencies.
As a researcher conducting an analysis of a recent court hearing, I can paraphrase that during the proceedings, Judge Richard Jones stated that no proof was presented to imply that Zhao was aware of any unlawful actions taking place at Binance. Consequently, he declined the DOJ’s proposal to enhance the suggested prison term from 10 to 16 months.
A four-month prison term and massive fines totaling billions of dollars might seem lenient to U.S. regulators, given their long-standing investigation into the former executive and his crypto empire, which began in 2018. Throughout this period, Binance faced multiple probes from various agencies such as the Department of Justice (DOJ), Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC).
As a cryptocurrency investor, I’ve closely followed CryptoMoon’s timeline of Binance’s regulatory challenges over the past few years. Here’s how it unfolded from my perspective:
February 2018: Department of Justice begins to investigate Binance
Since 2018, U.S. law enforcement has been probing Binance over allegations of non-compliance with American Anti-Money Laundering (AML) regulations and sanctions. Initially, investigators focused on possible charges of unauthorized money transmission, money laundering conspiracies, and violations of criminal sanctions.
The Commodity Futures Trading Commission examined the company in March 2021 over allegations that it provided crypto derivative contracts to American clients without first securing necessary registration.
February 2022: Binance Holdings and Binance.US under investigation by the SEC
The Securities and Exchange Commission (SEC) of the United States has initiated a probe into the relationship between Binance.US and the trading companies Sigma Chain AG and Merit Peak. The focus of the investigation is on how these firms reported any affiliations to their clients.
In June 2022, it was reported that the Securities and Exchange Commission (SEC) launched another probe, focusing on Binance Holdings’ 2017 initial coin offering (ICO) for suspected violations of securities registration laws.
March 2023: SEC, CFTC accuses Binance and CZ of several violations
The CEO of Binance, Changpeng “CZ” Zhao, along with the exchange and its compliance chief, Samuel Lim, faced lawsuits from the Commodity Futures Trading Commission (CFTC) for allegedly engaging in seven questionable trading practices and market manipulation. During this period, Binance recorded a daily trading volume exceeding $8.5 billion.
Zhao dismissed the accusations, maintaining that the crypto exchange neither made profits from trading nor manipulated the market in any way.
May 2023: DOJ targets Binance once again
In May, the Department of Justice initiated a new probe into Binance for suspected infringements of American sanctions regulations, specifically concerning Russian users’ ability to trade on the cryptocurrency platform.
The DOJ’s national security division’s examination included the use of the probe. Despite Russia’s sanctions enforced in April 2022, Binance carried on providing its services within the country till September.
June 2023: Binance and CZ are sued by the SEC
As a crypto investor, I’ve learned that the Securities and Exchange Commission (SEC) has brought allegations against Binance and its CEO Changpeng Zhao (CZ). The SEC is accusing them of breaching securities laws, specifically in areas such as insufficient market surveillance and potential wash trading. Essentially, they’re claiming that Binance failed to provide adequate oversight, potentially allowing for illegal activities like trading with one’s own account to manipulate prices (wash trading).
Among the allegations behind the charges are claims that Binance failed to restrict U.S. investors from using Binance.com and that Binance.US engaged in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” a company owned by CZ.
Furthermore, the lawsuit alleged that funds from Binance and Binance.US were combined in an account overseen by Merit Peak Limited, which is linked to CZ.
The SEC’s emergency action significantly curtailed Binance.US’s operations within the United States.
July 2023: Binance leadership departs
The departure of several top executives from Binance.US marked the beginning of a series of exits among Binance’s leading personnel that lasted for several months. This mass exodus followed the heightened scrutiny of Binance, ultimately resulting in at least ten essential figures leaving the company.
August 2023: DOJ fears bank run on Binance
During the DOJ’s deliberation over potential fraud allegations against Binance, there were worries among authorities about the potential for a mass withdrawal of funds from the platform, leading to consumer harm. At that point, it was rumored that the DOJ was exploring options other than criminal charges, such as imposing fines or negotiating non-prosecution deals, in order to minimize any negative impact on customers.
September 2023: Binance.US cuts staff, CEO resigns
Approximately 100 employees were let go from Binance.US’s team, and their CEO, Shroder, resigned in September.
The SEC voiced concerns to the court over Binance.US’s parent company’s uncooperative behavior during their discovery process. The regulatory body criticized the provision of vague screenshots and unsigned, undated documents as unhelpful.
November 2023: Binance and CZ indicted
As a crypto investor, I’ve witnessed a significant shift in the leadership of Binance. In a surprising move, CZ (Changpeng Zhao) relinquished his role as CEO due to a $4.3 billion settlement reached with U.S. regulatory authorities. This settlement involved penalties for various infractions, including insufficient Anti-Money Laundering measures within our platform. Subsequently, Richard Teng assumed the position of CEO at Binance.
In the resolution of both criminal and civil disputes, Zhao admitted guilt for a single felony offense. “I acknowledge my errors, and it’s important that I accept accountability,” expressed CZ. “[This outcome is] in the best interests of our community, Binance, and myself.” [Note: ‘resolution of both criminal and civil disputes’ could also be phrased as ‘settlement of the criminal and civil cases’]
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2024-05-01 00:02