The day Binance and its founder (CZ) pleaded guilty to federal crimes in Seattle, the crypto industry was stunned. There were endless reasons to be stunned. Why did CZ set foot on American soil? How long could he be in prison? How could he and his company pay their multimillion-dollar settlement? Does Binance have distant ties to Jeffrey Epstein?
Astute observers questioned another, perhaps much more important, event that day. In an opinionated post on They do not allege that Binance misappropriated user funds.”
The reporters blinked twice. One word in that sentence could affect CZ’s civil liberties. If not for the “resolutions,” that post would have been a lie on the same day he thought he had signed a criminal agreement.
It is not the best idea to mislead the public about an agreement with the US Department of Justice, two US Treasury offices and the Commodity Futures Trading Commission (CFTC).
Today I stepped down as CEO of Binance. It’s true that it wasn’t easy to let go emotionally. But I know it’s right. I made mistakes and I must take responsibility. This is what is best for our community, Binance and me.
Binance is no longer a baby. Is…
– CZ 🔶 BNB (@cz_binance) November 21, 2023
Read more: Changpeng Zhao resigns from Binance US board of directors and transfers voting rights
The reason CZ’s ruling is so problematic is that the only US agency that Binance and CZ did not reach a resolution with alleges that Binance misappropriated user funds. In fact, according to the lawsuit filed by the Securities and Exchange Commission (SEC):
“Through accounts owned and controlled by Zhao and Binance, billions of US dollars in customer funds from both Binance platforms were combined into an account maintained by an entity controlled by Zhao (called Merit Peak Limited).”
Needless to say, secretly redirecting Binance customers’ money to a private cryptocurrency trading fund owned by CZ, as the SEC alleges, is… not appropriate.
“No misappropriation” after the agreement with CZ
Binance and CZ have not resolved the SEC lawsuit. There is no public record of commissioners even offering a deal. To be clear, their lawsuit could be worth many billions of dollars, depending on its final outcome.
The SEC alleges that Binance sold BNB and BUSD in illegal securities offerings, operated illegal stock exchanges for years, hid information about investment risks from thousands of Americans, and illegally charged trading fees for operating its exchange, brokerage, and brokerage. unrecorded compensation.
If the commissioners win their lawsuit and convince a federal judge to force Binance to divest all profits it made from these activities, that worst-case judgment would add billions more to the existing $4.3 billion payable from Binance. In the worst case, that final ruling could bankrupt Binance.
On the other hand, maybe Binance will win its lawsuit with the SEC. It is already the largest crypto exchange in the world and can certainly afford to have the best defense lawyers in the world. Another well-funded ICO issuer with high-powered lawyers, Ripple, famously won a partial victory in its SEC lawsuit.
CZ denies misappropriation and market manipulation
For his part, former Binance CEO Changpeng Zhao has denied SEC allegations that entities he controlled commingled user funds. He also denies engaging in market manipulation.
Even if Binance wins its SEC lawsuit, it must pay its $4.3 billion settlement to resolve investigations by other government agencies: the US Department of Justice, the Treasury’s Financial Crimes Enforcement Network (FinCEN). of US and the Office of Foreign Assets Control (OFAC) and the CFTC.
The SEC case is still ongoing. Specifically, it is being investigated whether market makers controlled by CZ, called Merit Peak Ltd. and Sigma Chain, not only inappropriately held client funds, but also traded client money without the permission of its owners.
Binance and CZ plead guilty but SEC lawsuit persists
Read more: Binance top executive Noah Perlman’s ties to Epstein, Moonstone and Gemini
Reuters found evidence of the mix in bank records and company messages. Dirty Bubble Media independently found evidence of the same mixture at addresses belonging to Merit Peak.
In short, unfortunately for CZ, the exact accusations he claims do not exist in his “resolutions.” do exist in the 136-page complaint filed by the SEC.
CZ boasted: “Funds are SAFU” in his statement about his resignation from Binance. However, client funds have not always been as “SAFU” as he would have liked clients to believe.
If the SEC’s allegations are true, customer funds were occasionally misappropriated at entities other than Binance.
That also makes one word in CZ’s admission on the day of his criminal guilty plea – “resolutions” – a saving grace. Time will tell if he can bear the weight of his unresolved obligations.
