CZ

Judge accepts Binance CEO CZ’s guilty plea, with sentencing in Feb

This court “hereby accepts the guilty plea of the defendant to the charge […] and the defendant is adjudged guilty of such offense,” wrote Judge Richard Jones.

A federal judge has accepted Binance founder Changpeng “CZ” Zhao’s guilty plea to money laundering but hasn’t decided whether he can leave the United States before his February sentencing date.

In a Dec. 6 filing to a Seattle District Court, Judge Richard Jones said he accepted Zhao’s guilty plea to one count of Bank Secrecy Act violations, which the Binance founder submitted over two weeks ago on Nov. 21 alongside his exchange’s $4.3 billion settlement with United States agencies.

Part of the settlement deal saw Zhao step down as CEO of Binance and pay $150 million to regulators.

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Binance is now 'totally different': Interview with CEO Richard Teng

The new CEO of Binance takes stock of the exchange’s future following a landmark $4.3 billion settlement with United States authorities in a one-on-one interview with Cointelegraph.

Binance CEO Richard Teng has assured the “gaps in compliance” from the early days of Binance are firmly in the past and that the crypto exchange is now “totally different.”  

Teng, the former head of regional markets for Binance, was elevated to the position of CEO on Nov.

“As part of the settlement, CZ cannot be involved in the day-to-day running of the company’s operations,” Teng explained.

Despite that, the incumbent CEO of Binance cuts the figure of a man reveling in the challenges ahead.

“I’m taking the baton and pushing ahead with our growth agenda while working very closely with global regulators.”

Teng believes that the “overcast” conditions clouding Binance in recent months are lifting following its staggering $4.3 billion settlement with the United States Justice Department relating to a raft of violations of U.S.

$4.3B settlement a result of early gaps in compliance

The exchange has paid dearly for mistakes made during its meteoric growth from 2017 onwards. Teng recalls how Zhao built Binance from a team of six people to a global operation consisting of thousands of employees that serves a user base estimated to be more than 166 million.

“In those very early days while we were building up the company, there were gaps in terms of compliance. That resulted in all these breaches and mistakes, but these are historical issues.”

The shortcomings of its early compliance regime have led to the largest crypto-related settlement in U.S.

Binance is now ‘totally different’: Interview with CEO Richard Teng

In a one-on-one interview with Cointelegraph, the new CEO of Binance takes stock of the exchange’s future following a landmark $4.3 billion settlement with United States authorities.

Binance CEO Richard Teng has stated that the “gaps in compliance” from the early days of Binance are firmly in the past and that the crypto exchange is now “totally different.”  

Teng, the former head of regional markets for Binance, was elevated to the position of CEO on Nov.

“As part of the settlement, CZ cannot be involved in the day-to-day running of the company’s operations,” Teng explained.

Despite that, the incumbent CEO of Binance gives the impression of a man reveling in the challenges ahead.

“I’m taking the baton and pushing ahead with our growth agenda while working very closely with global regulators.”

Teng believes that the “overcast” conditions clouding Binance in recent months are lifting following its staggering $4.3 billion settlement with the Justice Department relating to a variety of violations of U.S.

$4.3 billion settlement a result of early gaps in compliance

The exchange has paid dearly for mistakes made during its meteoric growth from 2017 onwards. Teng recalled how Zhao built Binance from a team of six people to a global operation consisting of thousands of employees that serves a user base estimated to be more than 166 million.

“In those very early days, while we were building up the company, there were gaps in terms of compliance. That resulted in all these breaches and mistakes, but these are historical issues.”

The shortcomings of its early compliance regime have led to the largest crypto-related settlement in U.S.

Fed liquidity injections drive down US Treasury yields, but not Bitcoin price

Regulatory uncertainty and the recent enforcement actions taken against major crypto exchanges reduces the odds of Bitcoin breaking above $30,000 in the short-term, but investors are still bullish.

Bitcoin (BTC) might have shown strength after successfully defending the $28,000 support amid unfounded rumors regarding Binance, but an interesting development to note is BTC is becoming less correlated to traditional markets after the United States Federal Reserve elected to provide emergency liquidity to banks. 

This change in attitude from the central bank has caused a shift in the trajectory of U.S. Treasurys as traders sought refuge from the inflationary upward pressure. Bitcoin appears to be agnostic to the movement and its price has been hovering around $28,000 for the past week.

Meanwhile, the yield on the five-year note fell to 3.50% on April 3, a drop from 3.70% in the previous week. Higher demand for debt instruments reduces payout, resulting in a lower yield. The $152.6 billion in outstanding borrowings from the U.S. Federal Reserve’s backstop lending program has been the driving factor.

The general public’s lack of trust in banks has also caused them to reconsider what the Federal Deposit Insurance Corporation is and how the Fed no longer controls the inflation trajectory. The question of whether Bitcoin can serve as a reliable store of value during a crisis remains open, but the 70% year-to-date gains certainly demonstrate a point.

Investors are reducing their cash positions

According to data from Bank of America, the total assets of money market funds in the United States reached a record high of $5.1 trillion. These instruments invest in short-term debt securities such as the U.S. Treasurys, certificates of deposit and commercial paper. Furthermore, fund manager and analyst Genevieve Roch-Decter states that investors have withdrawn $1 trillion from banks because money market funds offer a much higher return.

Even though Bitcoin investors view cryptocurrencies as a safe haven against inflation, a recession would reduce demand for goods and services, resulting in deflation. The risk increased substantially after the March U.S. ISM Purchasing Managers Index data was released. At 46.3, the indicator reached its lowest level since May 2020, below analysts’ forecast of 47.5, indicating contraction.

According to Jim Bianco, macro analyst at Bianco Research, this was the 16th time since 1948 that the level had reached such a low point, and in 75% of those instances, a recession followed.

Let’s examine Bitcoin derivatives metrics to determine the current market position of professional traders.

Bitcoin derivatives traders did not fold under the FUD

Bitcoin quarterly futures are popular among whales and arbitrage desks, which typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Bitcoin 2-month futures annualized premium. Source: Laevitas

Since March 30, the Bitcoin futures premium has been hovering near the neutral-to-bearish threshold, indicating that professional traders are unwilling to turn bullish despite the BTC price remaining near $28,000.

The absence of demand for leverage longs does not always imply a price decline. As a result, traders should investigate Bitcoin’s options markets to learn how whales and market makers value the likelihood of future price movements.

The 25% delta skew indicates when market makers and arbitrage desks overcharge for upside or downside protection. In bear markets, options traders increase their odds of a price drop, causing the skew indicator to rise above 8%. Bullish markets, on the other hand, tend to drive the skew metric below -8%, indicating that bearish put options are in less demand.

Related: Bitcoin price bounces after CZ arrest rumors as traders eye $30K next

Bitcoin 60-day options 25% delta skew: Source: Laevitas

The 25% skew ratio is currently at -5 because protective put options are trading slightly cheaper than neutral-to-bullish calls. That is a bullish indicator, given the recent FUD generated after the Commodities Futures Trading Commission sued Binance on March 27. The regulator alleges that Binance and CZ violated regulatory compliance and derivatives laws by offering trading to U.S. customers without registering with market regulators.

So far, Bitcoin has held up well as the baking sector forced the Fed to reverse its credit-tightening policy. However, as long as regulatory uncertainty surrounds major crypto exchanges, Bitcoin is unlikely to break above $30,000.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Who was front-running Binance users?

Information revealed in January indicated that the owner of 16 Ethereum addresses profited by purchasing tokens shortly before they were listed on Binance.

On Jan. 26, a Medium article revealed that an entity with control over multiple Ethereum addresses had consistently purchased cryptocurrencies prior to their listing on Binance, selling them for a million-dollar profit after the event.

The article refers to 16 cases from an on-chain analysis perspective, demonstrating how the mysterious entity was aware of Binance listings several days in advance, and how it was unlikely to be carried out by someone with little experience in concealing its tracks.

Surprisingly, Binance founder Changpeng “CZ” Zhao issued a statement on the subject two months later, only after the article gained traction on Twitter. CZ claims that the exchange “froze $2 million associated with the address in question” but does not say whether Binance employees were involved.

Traders are now demanding an investigation into the illegal use of insider information in these multiple “front-run” instances. However, the burden of proving illegal access to privileged information may prove difficult for prosecutors.

At first glance, the accusations about front-running Binance listings appear to be reasonable. However, the on-chain data and numerous instances of “sheer luck” in purchasing cryptocurrencies on decentralized exchanges (DEX) prior to their listing on Binance may not constitute a crime.

Altcoins do not necessarily constitute securities instrument

A securities instrument is a financial asset that can be bought or sold on regulated exchanges, representing ownership or debt from a publicly traded company or government entity. The most common types of securities include stocks, bonds, options and futures contracts.

In the United States, securities listing and trading are primarily regulated by two government agencies: the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA). The SEC is responsible for enforcing federal securities laws, including overseeing the registration and disclosure requirements for securities issuers, while FINRA oversees the firms and professionals involved in the securities industry.

The accusations against an entity that has consistently run covert operations ahead of Binance listings, supposedly profiting by more than $1.4 million, may have all the elements that justify non-usual trading activities and, almost certainly, unethical. More importantly, such entities might have gotten the information without Binance employees’ knowledge. Still, there are three reasons why insider trading rules likely can not be applied to such a case.

The Coinbase front-run involved wire fraud

Unlike securities, non-securities investments, such as real estate, art, commodities and cryptocurrencies, are not regulated by the SEC or any other regulatory body. As a result, there are no specific laws or regulations prohibiting front-running in these types of investments.

Even though the above statement is true, the most notorious case of insider trading activity, involving a former product manager at Coinbase, ultimately involved wire fraud. Under U.S. federal law, wire fraud is defined as a crime that involves a scheme to defraud others, with the use of interstate wire communications, including electronic formats.

Related: Crypto exchanges keep failing, so why do we still trust Changpeng Zhao?

Wire fraud is a serious crime that can result in severe penalties, including fines and imprisonment. It is typically investigated and prosecuted by federal law enforcement agencies, such as the Federal Bureau of Investigation or the Department of Justice.

Nikhil Wahi and Sameer Ramani were charged with using Ethereum blockchain wallets to acquire digital assets and trading before the Coinbase announcements. However, jurisdiction is a huge difference versus the wallet tied to the Binance listing, as the exchange is not located in the U.S. and, supposedly, does not serve clients based in that region.

In many jurisdictions, there may not be specific laws or regulations that prohibit front-running in non-securities investments. Therefore, without a legal framework to prohibit this behavior, it may not be considered illegal.

One needs to prove that the information was illegally acquired

Front-running in securities is often associated with insider trading, which is illegal. However, insider trading typically involves trading securities based on material, non-public information. Since non-securities investments do not involve securities, the concept of insider trading does not apply.

Related: Expect the SEC to use its Kraken playbook against staking protocols

To build a case against the owner of the Binance-related listing address, it would be necessary to demonstrate that the owner obtained the privileged information through illegal means. Even if the account has a perfect track record, circumstantial evidence is unlikely to hold in this case.

Unfortunately, cryptocurrency regulation is at best ambiguous, and even the SEC has difficulty proving to courts what cryptocurrencies are considered securities. Moreover, the Commodity Future Trading Commission’s case against Binance and CZ demonstrates that users are not protected from illegal trading activities, regardless of whether they occur with the knowledge or approval of exchange management.

Marcel Pechman is a crypto analyst who worked for 17 years as an equities sales trader for UBS, Deutsche Bank, Pactual & Banco Safra. He holds a post-graduate certificate in engineering and a bachelor’s degree in business administration.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Binance and CZ sued by CFTC over US regulatory violations

The cryptocurrency exchange and its founder, Changpeng Zhao, have allegedly violated trading and derivatives rules.

The United States Commodity Futures Trading Commission has filed suit against Binance and CEO Changpeng “CZ” Zhao for trading violations, according to a Bloomberg report. The suit was filed in the U.S. District Court for the Northern District of Illinois.

According to the CFTC, Binance failed to meet its regulatory obligations by not properly registering with the derivatives regulator. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021. The exchange acknowledged in February that it would likely face regulatory action in the United States and was already working with regulators.

In addition to the CFTC, Binance has been under investigation by the Internal Revenue Service and federal prosecutors, who have examined the exchange’s adherence to Anti-Money Laundering rules. Meanwhile, the Securities and Exchange Commission has been investigating whether Binance allowed U.S. traders to access unregistered securities. 

Binance is the biggest cryptocurrency exchange with over $8.5 billion trading volume daily.

This is a developing story, and further information will be added as it becomes available.

Breaking: Binance and CZ sued by CFTC over US regulatory violations

The cryptocurrency exchange and its founder, Changpeng Zhao, have allegedly violated trading and derivatives rules.

The United States Commodity Futures Trading Commission (CFTC) has filed suit against Binance and CEO Changpeng “CZ” Zhao for trading violations, according to a Bloomberg report. The suit was filed in the U.S. District Court for the Northern District of Illinois.

According to the CFTC, Binance failed to meet its regulatory obligations by not properly registering with the derivatives regulator. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021. The exchange acknowledged in February that it would likely face regulatory action in the United States and was already working with regulators.

In addition to the CFTC, Binance has been under investigation by the Internal Revenue Service and federal prosecutors, who have examined the exchange’s adherence to Anti-Money Laundering rules. Meanwhile, the Securities and Exchange Commission has been investigating whether Binance allowed U.S. traders to access unregistered securities. 

Binance is the biggest cryptocurrency exchange with over $8.5 billion trading volume daily.

The price of Bitcoin (BTC) has plummeted since the announcement, falling from $27,781 at 13:45 UTC to $26,755 in an hour and 15 minutes. 

The suit claims Binance conducted transactions in Bitcoin (BTC), Ether (ETH) and Litecoin (LTC) for persons in the United States since at least 2019 despite a policy of blocking or restricting U.S. customers. The company and its executives intentionally violated U.S. law, the suit said:

“All the while, Binance, Zhao, and Lim, the platform’s former Chief Compliance Officer (“CCO”), have each known that Binance’s solicitation of customers located in the United States subjected Binance to registration and regulatory requirements under U.S. law.”

According to the suit, Binance obscured the location of its executive offices, as well as the “identities and locations of the entities operating the trading platform.” The suit cites an internal Binance memo in which CZ stated that the purpose of that policy was to “keep countries clean [of violations of law]” by “not landing .com anywhere. This is the main reason .com does not land anywhere.”

Binance employs at least 60 people in the United States, “and that number continues to increase,” the CFTC said in the suit. It also holds U.S. trademarks. Binance launched Binance.US arm in 2019.

Related: Binance employees allegedly help customers in China bypass KYC controls

Among other charges made by the CFTC are the claims that Binance failed to register with the regulator and violated provisions of the Commodities Exchange Act and CFTC regulations, including legally mandated implementation of Anti-Money Laundering and Know Your Customer (AML/KYC) controls.

In addition, the defendants failed to supervise the company’s activities adequately and willingly conducted activities beyond U.S. borders to evade the U.S. Commodities Exchange Act and took other actions to evade regulation:

“Zhao and others acting on behalf of Binance have used Signal—with its auto-delete functionality enabled—to engage in business communications, even after Binance received document requests from the CFTC and after Binance purportedly distributed document preservation notices to its personnel.”

The suits stated that Binance offered leverage to customers trading on the spot market and called two categories of product it offered “futures” and swaps it called “perpetuals.” It allegedly also “traded on its own platform through approximately 300 ‘house accounts’ that are all directly or indirectly owned by Zhao,” as well as through accounts owned by entities Zhao owned or controlled. Binance did not disclose that activity to its customers.

CFTC Global Markets Advisory Committee member Christopher Perkins said in a statement provided to Cointelegraph:

“While it’s too early to opine on the merits of the CFTC case against Binance, we remain supportive of principles-based regulation across the crypto industry.”

The CFTC is pressing seven counts for executing unregistered futures transactions, providing illegal commodities options, failure to register as a Futures Commission Merchant, Designated Contract Market or Swap Execution Facility, failure to supervise diligently or implement AML/KYC measures and law evasion.

Binance ‘not planning any layoffs,’ 500 roles to be filled in H1

A Binance spokesperson told Cointelegraph that they hired 600 people since January and have no imminent plans for layoffs.

Cryptocurrency exchange Binance is “not planning any layoffs” and is instead trying to fill another 500 roles by the end of June, according to a Binance spokesperson.

The comments came despite a huge spike in crypto layoffs in January — the majority of which were from crypto exchanges. In a statement, the Binance representative said: 

“As of today, we are actively hiring for more than 500 roles with the goal of filling them by the end of H1 […] We are not planning any layoffs.”

The spokesperson was responding to a request for clarification from Cointelegraph on March 1 regarding a tip it had received of possible redundancies at the crypto exchange. The latest comments appear to completely refute this speculation.

At the time of writing, Binance had 463 listings on its job openings page, with roles in business development, communications, customer support and engineering, to name a few.

Some of the business development job openings at Binance. Source: Binance

In January, Binance CEO Changpeng Zhao said that the firm was planning for a hiring spree in 2023, increasing its headcount by 15% to 30%, according to a Jan. 11 report from CNBC.

The spokesperson said that the company has hired more than 600 people since the start of 2023.

According to CoinGecko, 84.8% of the crypto layoffs in January were due to crypto exchanges reducing headcount, including Coinbase, Huobi, Blockchain.com, Crypto.com and Luno.

Coinbase announced it would be reducing its headcount by around 950 on Jan. 10, while Crypto.com announced on Jan. 13 that it would be reducing its workforce by around 500.

Related: Sen. Elizabeth Warren and colleagues demand to see Binance’s balance sheets

Binance has been regarded by some, such as Arcane, as one of the “winners” of 2022, with the fall of crypto exchange FTX and the implementation of zero-fee Bitcoin (BTC) trading leading to it capturing an overwhelming portion of the market.

On the other side of the coin, the exchange has also seen intense scrutiny. Most recently, this has revolved around the alleged shuffling of $1.8 billion in funds which some have compared to the actions of bankrupt crypto exchange FTX.

Binance CEO Changpeng Zhao took to Twitter to respond to the allegations, labeling it “FUD” and suggesting it was standard practice for an exchange.

This year has had a tough start for those working in the crypto industry, with at least 14 firms and nearly 3,000 jobs being lost in January before a milder 570 layoffs in February.

But the tide could be turning, with the crypto market cap increasing by over 34% so far in 2023, according to CoinMarketCap, and other firms, such as USDC issuer Circle, also planning to go on a hiring spree.

Binance CEO responds to Forbes claims: ‘They don’t know how an exchange works’

The co-founder and CEO of Binance, Changpeng Zhao, took to Twitter in response to a ‘FUD’ article published by Forbes about the exchange and its recent “shuffling” of funds.

In the aftermath of the FTX collapse, Forbes published a article focused on the recent “shuffling” of funds by the cryptocurrency exchange Binance. 

However, the following day on Feb. 28, Binance co-founder and CEO Changpeng “CZ” Zhao took to Twitter to respond. In response to the article, which he called “FUD,” the CEO said:

“They seem to not understand the basics of how an exchange works. Our users are free to withdraw their assets any time they want.”

In his series of tweets, he addressed various claims from the Forbes article. This included a “backroom maneuver” when Binance transferred $1.8 billion in stablecoin collateral to hedge funds such as Tron, Amber Group and Alameda Research between August and December 2022.

In light of the movement of funds, the article drew parallels between Binance and the now-defunct FTX in the lead-up to its demise. It also touched on the recent failed Voyager bid by Binance.US and the United States Securities and Exchange Commission’s planned legal action against Paxos Trust Company — the issuer of the Binance-branded stablecoin, Binance USD (BUSD).

Related: Circle blew the whistle on Binance reserves to NYDFS: Report

On Feb. 10, 2022, Forbes announced that Binance would take a $200 million stake in the company as a strategic investment.

However, in June 2022, in a follow-up report from Bloomberg, CZ said the company’s investment agreement is “changing” after Forbes’ deal to go public fell through. In light of the article, there has been no update on the situation.

However, in response to CZ, one Twitter user suggested he buy Forbes and “delete it,” to which CZ said, “not worth it.”

The article from Forbes comes after the New York Department of Financial Services (NYDFS) ordered the blockchain company Paxos Trust Company to terminate its issuance of BUSD. 

On Feb. 13, it officially announced it would no longer mint the stablecoins while giving them a redemption period until February 2024. Binance says it still supports BUSD and is now looking into non-USD stablecoins.

Voyager and Binance.​US deal given initial nod amid national security probe

The deal has received initial approval from the bankruptcy judge but will require the approval of creditors and final court approval.

Bankrupt crypto lender Voyager Digital has received initial court approval for its proposal to sell its assets to Binance.US for $1.02 billion.

The approval comes amid a national security probe concerning Binance.US that Voyager is seeking to speed up.

On Jan. 10, Judge Michael Wiles of the United States Bankruptcy Court for the Southern District of New York allowed Voyager to enter into the asset purchase agreement and seek creditor approval, but the sale will not become final until a future court hearing, according to a Jan. 11 Reuters report.

It comes as Voyager wants to expedite a review of its proposal to sell assets to Binance.US, which could result in the deal being blocked or delayed.

Voyager’ attorney Joshua Sussberg noted during the court hearing that Voyager has been responding to questions from the Committee on Foreign Investment in the United States (CFIUS) and will address any concerns that CFIUS has which could see it oppose the transaction.

“We are coordinating with Binance and their attorneys to not only deal with that inquiry, but to voluntarily submit an application to move this process along,” Sussberg said.

CFIUS is an inter-agency body that reviews foreign investments or acquisitions of U.S. companies for national security concerns.

If it determines that national security concerns regarding the deal are justified CFIUS can block or unwind the transaction or tell involved parties to alter the deal to mitigate concerns.

Cast your vote now!

CFIUS filed a court notice on Dec. 30 indicating “one or more transactions contemplated” by Voyager could be subject to a review, resulting in possible blocks or delays.

Binance’s global entity is reportedly being probed by the U.S. attorney’s office over money laundering allegations, but its CEO, Changpeng “CZ” Zhao, has stated that Binance.US is a “fully independent entity” headquartered in California.

Zhao is a Chinese-born Canadian citizen and CFIUS is authorized to review any transactions that could result in foreign control of a U.S. business or thaaffords a foreign person an equity interest.

Related: Mark Cuban to face questioning under oath over promotion of Voyager

The Voyager Official Committee of Unsecured Creditors — a body representing creditors with no security interests in Voyager — supported the transaction in its current form, noting the deal would result in greater recoveries for creditors than if Voyager liquidated its holdings itself — which is what would occur if CFIUS blocks the transaction.

Previously, objections to the acquisition proposal from Alameda Research, the Securities and Exchange Commission, four U.S. states and the U.S. trustee were rebutted by the bankrupt lender on Jan. 8.

Voyager claimed that the transaction is in the best interest of its creditors and the objections “fail to put forward any factual or legal support” for its arguments.

Voyager announced on Dec. 19 that it had agreed to Binance.US’s bid to acquire its assets for $1.022 billion, after a $1.4 billion deal with FTX.US fell through following the bankruptcy of the crypto exchange.