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In a shocking development for the international Bitcoin community, Binance founder and CEO Changpeng Zhao is resigning from his position amid a guilty plea to criminal and civil charges in the United States.
Binance, the world’s largest digital asset exchange by volume, has seen its very future called into question following a legal battle with the US Department of Justice (DoJ). Founder and CEO Changpeng Zhao, also known as CZ, pleaded guilty on September 21 to money laundering violations and agreed to resign from his position and pay a $50 million fine, which could be scaled down. Binance will also pay a whopping $4.3 billion fine, and this penalty seems pretty set in stone. This agreement comes after a month of legal proceedings battle in which the DoJ accused him of several serious violations: not only by facilitating transactions with sanctioned groups such as the Russians, mercenaries fighting in Ukraine, but even encourage users to cover their tracks over potential violations of money laundering laws.
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Since its inception in 2017, Binance has steadily grown over the years to become the most popular Bitcoin exchange in the world. The company was initially based in China, but has moved several times over the years, even to different continents, and currently does not have an official headquarters. It gained notoriety despite needing a different platform, Binance.US, to offer services of any kind in the United States, but its biggest boons came when it absorbed FTX clients as a result of the apocalyptic collapse of this stock market. CZ has long been one of the leaders in the industry the biggest players, but especially since the fall of FTX, Binance is unquestionably the biggest in the space. And now CZ’s deal appears to be a last resort measure to keep the company operational.
In his resignation letter, released a day after pleading guilty in Seattle, CZ asserted that “Binance will be fine. I will have to deal with some pain, but we will survive. We will get there, but with some structural changes. “Maybe it wouldn’t be a bad thing when we look back in a few years,” adding that he “needed a break anyway.” Publicly, he tried to present an optimistic face, expressing confidence in its employees and encouraging a smooth transition for the new boss, Richard Teng. Despite this confident facade, new difficulties still lie ahead for CZ and his company.
On the one hand, since Binance had to create a subsidiary to operate in the United States, Binance.US is not strictly covered by the original plea agreement with the Department of Justice. Indeed, since November 27, the Securities and Exchange Commission (SEC) has been actively working to investigate the US branch for misuse of consumer funds and a possible backdoor that CZ could use to continue accessing Binance.US assets. Binance attorney Matthew Laroche claimed the company “withered under the stress and cost of the SEC lawsuit.” Binance.US’ average monthly asset value is down nearly 90% and Binance.US has lost nearly half of its monthly users since the SEC filed its filing.
In addition to this continued attempt to limit CZ’s potential resources, his movements are also restricted. Changpeng Zhao has made connections in several countries: having been born in China, his family immigrated to Canada during his childhood and there is citizenship. Additionally, he is a citizen of the United Arab Emirates and resides there with his wife and children. Considering that the latter country does not have an extradition treaty with the United States and that CZ has enormous resources to draw on, Seattle District Court Judge Richard Jones. labeled him a flight risk. As part of his bail deal, CZ is temporarily barred from leaving the United States as the government says a multi-billionaire with a foreign nationality who has pleaded guilty and could face prison time would be detained ” in the vast majority of cases. In other words, him being released from prison in the United States is in itself an exaggeration, let alone leaving the country.
Obviously, the presumption that the founder and manager of the company would engage in this type of behavior does not bode well for the company. One of its main competitors is already experiencing a major boom, in the same way that Binance benefited from the collapse of FTX: since CZ announced his resignation, the Coinbase exchange has seen its share price increase. growth by around 20% in five days. This boost for Coinbase comes on top of a very profitable year, as the overall valuation of the company’s shares has jumped nearly 90% over the past six months. Coinbase is even engaged in a legal process battle with the federal government, but clearly it is doing better in this regard.
Despite all these setbacks, the company is looking forward. New CEO Richard Teng told the press that it has a “robust timeline” for moving forward with corporate compliance. Noting that “Binance is a six-year-old company – it’s a relatively young company in every way”, he claimed that he intended to change the “disruptive” attitude of many tech startups and situate the company in the world of traditional finance. . A former banking regulator, Teng hopes to bring this moderation experience to Binance in the future. Additionally, even though other companies may benefit from their competitors’ failure, a sense of solidarity exists: former BitMEX CEO Arthur Hayes called the treatment of CZ is “absurd” compared to other money laundering offenders like former Goldman Sachs CEO Lloyd Blankfein, and questioned what these developments could mean for all digital asset trading.
Moving away from Coinbase itself, one must consider how Bitcoin as a whole has factored into these developments. In other words, everything went well: the price rise that began in October continued unabated. Comparing this to the five-alarm fire during FTX’s collapse, it’s easy to see how much the industry has matured: commentators have taken notice of general confidence that Bitcoin is here to stay. Several of the biggest crashes in Bitcoin history have coincided with the collapse of major exchanges, but the headlines are full of general information. optimism and the Bitcoin rally hasn’t even faltered. The state of affairs in 2023 seems clear: while individual companies may rise or fall, Bitcoin has achieved enough adoption and awareness that it will take more than one company to seriously harm it. Binance could very well bounce back from setbacks like this, and if it does, a vibrant industry will be waiting for it.