Zhao Changpeng, once the richest man in China, pleaded guilty. Changpeng Zhao should be familiar to everyone. He is the CEO of Binance, the largest virtual currency exchange in the currency circle, and a well-known figure in the currency circle.Not only did he resign as CEO of Binance, he may also face jail time and 18 months in prison. At the same time, Binance also claimed penalties and compensation of up to 4.3 billion U.S. dollars, equivalent to approximately RMB 30.7 billion.
I have lost count of how many zeros follow this.
All this happened in the early hours of this morning.
The U.S. Department of Justice released a full 32 pages of accusations, hitting Changpeng Zhao and Binance in the face.
Zhao Changpeng finished his protest, and finally the two parties reached a settlement.
The terms of the settlement are as shown at the beginning: Lao Zhao will resign and be laid off, be fined, and face imprisonment.
All I can say is that this big brother in the currency circle is furious, and he is really chasing after me, refusing to give in to each other.
SBF, the founder of the third largest virtual currency exchange with a net worth of tens of billions, successfully achieved zero assets and was sentenced to life imprisonment.
On the back foot, Zhao Changpeng slipped again and slid to the prison to meet SBF.
This is not just a major earthquake in the currency circle. If there is any further turmoil, the circle's homestead will be dug up.
Even when netizens were eating melons, they began to worry that Sun Gaie would be the next one to be hammered.
However, it is different from SBF who cuts off everyone's money to give himself blood transfusions.
Among the accusations against Zhao Changpeng, there is no misappropriation of funds and market manipulation.
In the presence of his peers, Zhao Changpeng appears to be quite honest.
The charges that actually fell on Binance were: engaging in anti-money laundering, unauthorized fund transfers, and sanctions violations. There were willful violations of the Bank Secrecy Act, willful failure to register as a money transfer business, and willful violations of the International Emergency Economic Powers Act.
It may sound a bit long, but I will briefly classify the bad reviews into three main items:
1. Illegal provision of services to US users.
2. No anti-money laundering monitoring was implemented.
3. Provide services to countries subject to U.S. sanctions.
Let’s sort it out one by one. The first is this illegal provision of services to American users.
We all know that if we go to a place to do business, we must follow the local rules.
For example, when selling pancakes in China, you must comply with Chinese legal restrictions such as the Food Safety Law.
But Binance only wanted to make money and didn’t want to be controlled, so it simply said: We don’t do your old and American business, and you don’t want to control me.
In order to show its attitude, in 2019, Binance also publicly announced that it would stop providing services to US residents.
As a result, the Ministry of Justice investigated and found out, good guy, how come you made all your money from Americans.
There are not only Americans active on Binance, but the number is quite large. The U.S. market accounts for 20% to 30% of the company’s potential revenue.
Changpeng Zhao is not a fool. He knows the importance of the US market to Binance and the consequences of doing business secretly.
But his principles of doing things can be perfectly summed up by a sentence he said in 2019:"It's better to ask for forgiveness than to get permission."
A simple translation is:I’ll earn the money in this gray area first and then talk about it.
Therefore, in order to retain American users, Binance has spent a lot of effort behind the scenes.
For example, they personally helped some American users change their IP addresses to appear compliant.
What’s even funnier is,Perhaps in order to deceive others, in the internal monthly report, the labels of American users were specifically deleted and classified as "UNKWN" (Unknown).
There is no more than three hundred taels of silver here.
For this second crime, violating anti-money laundering regulations, Binance was also hammered to death by the evidence of the Ministry of Justice.
For example, when you go to a bank to handle business, you must submit basic personal information, such as name, address, ID, etc.
It is never possible for a bank to just come and do things for you. At least it needs to know who the customer is and do an identity check, also called KYC (Knowyourcustomer).
However, for Binance, it just wants to make more money. If there is one more layer of review, wouldn’t it be possible to block people?
Therefore, before 2022, there is no need to upload any personal information when trading on Binance, and Binance will accept everyone who comes. There are more than 1.6 billion US dollars in profits, all without identity supervision.
In this matter, the powerful Ministry of Justice even took off Binance’s pants.
They directly found the chat records of internal employees and found out that Binance not only failed to comply with anti-money laundering regulations, but also secretly promoted it.
Do you think money laundering is too difficult? It’s okay, come to Binance, wegotcakeforyou.
Not only does it not conduct user audits, Binance also continues to get caught up in various flashpoints from the U.S. Department of Justice.
The United States has a so-called "economic sanctions plan" that explicitly prohibits Americans from conducting transactions with designated countries and regions, such as Iran, North Korea, Syria, and parts of Ukraine.
But Binance has transactions of up to US$900 million with Iran alone.
Moreover, it was also discovered that it had been trading with the Russian darknet market Hydra since 2017 until this organization was taken down.
The several crimes listed by the Ministry of Justice are almost all supported by irrefutable evidence.
Therefore, Zhao Changpeng basically claimed them all. In addition to 4.3 billion in compensation, he also faces a maximum of 18 months and a minimum of 10-12 months in prison.
But this point is actually just the opening show of this accusation, and the real punch has not yet come down.
This time, Changpeng Zhao only reached a settlement with the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, the U.S. Department of the Treasury’s Office of Foreign Assets Control, and the Financial Crimes Enforcement Network.
There is another important player, the U.S. Securities and Exchange Commission, which has been silent.
They are more ruthless than the Department of Justice. In June this year, the SEC threw out a 136-page charging document. The whole currency circle was in an uproar.
Now if you look back, you will find that a lot of the SEC's evidence matches this investigation.
For example, the SEC also obtained the chat records of insiders and criticized them for providing services to American users:
"On the surface, we don't have American users, but in fact, we should get them through other creative ways. "
In addition to the greater number of charges, the more important thing is that the SEC feels that it must equate most virtual currencies with securities.
Once virtual currencies are equal to securities, all transactions must be in accordance with the provisions of the Securities and Exchange Act.
This is not just a matter of significantly tightened supervision, the nature of many things has changed.
For example, Changpeng Zhao's behavior in operating Binance is called "illegal operation of a stock exchange", and virtual currency is "unregistered securities for many years"
. The SEC made a picture based on the chat content of Binance employees: "Brother, we are an unlicensed fucking stock exchange in the United States."
So what awaits Changpeng Zhao here at the SEC is another unimaginably huge fine.
However, his butt was obviously burning, and the entire currency circle felt like it was facing a formidable enemy. However, when he checked Zhao Changpeng’s Twitter, he found that he was calm and calm and not at all panicked.
He also said that he would take a good rest and then invest more in blockchain, AI, etc. .
Just two days before announcing his resignation, he tweeted to ridicule that someone had placed the wrong photo and used his photo on another entrepreneur named Zhao Peng.
The reason why he was so calm and calm in the face of the accusation.
On the one hand, it may be that these 4 billion are really just water for him.
And, despite losing his position, U.S. regulators retained some of his shares in Binance.
In addition, in the face of SEC accusations, Binance feels there is room for maneuver.
According to ODAILY’s report, He Yi, the co-founder of Binance, spoke in a group and said that the SEC is a civil lawsuit and can be resolved through litigation.
Because not long ago, another virtual currency company, Ripple, was also accused by the SEC of unregistered securities issuance. However, in the end, a U.S. Manhattan judge ruled in favor of Ripple, holding that the virtual coins it issued were not securities.
Perhaps because of the support of this successful case, Binance feels that it has a good chance of winning. If it doesn't work, just lose some more money.
Moreover, for many virtual currency exchanges and companies, including Binance, the impact of this incident is not necessarily negative.
In addition to fines, the Ministry of Justice has also implemented further industry regulations, such as requiring monitoring and reporting of suspicious activities. If you are good at compliance, you are still a good boy.
In this way, the virtual currency issue is completely discussed.
Only when things are cleared up can we talk about compliance, regulation and development.
After all, the currency circle is indeed a mixed bag, and it has become an opening for money laundering or other illegal activities.
It would be a good thing if someone came to purify the general environment and put an end to those shady activities.
Under the heavy hammer of supervision, a large number of people will inevitably be killed. But behind the tightening of regulations is an opportunity for virtual currencies to develop to the next level.