CZ Denies Allegations That Binance Has Been Evading Regulators

News / 29.10.2020

There’s never a dull moment in crypto! Today’s major headline is a leaked “Tai Chi” document that allegedly reveals Binance’s grand “scheme” to evade regulatory bodies. 

According to a controversial Forbes article published Thursday, leading cryptocurrency exchange, Binance “conceived an elaborate corporate structure designed to intentionally” mislead United States regulators. 

The report claims that the information was gathered from a supposed leaked document created in 2018 and seen by Binance “senior executives.” Forbes said it obtained the document but chose to keep the identity of the source anonymous. 

The source alleged that the 2018 document was created by Binance’s former employee Harry Zhou. Zhou is a serial entrepreneur and co-founder of San-Francisco-based crypto exchange Koi Trading, partly owned by Binance.

A Bait and Switch

The anonymous source told Forbes that the document was first presented to Binance CEO Changpeng Zhao (CZ) by Binance’s mergers and acquisitions manager Jared Gross. Forbes believes the attorney is Binance’s general counsel. 

The leaked document outlined a strategic plan to use a yet-unnamed U.S. company dubbed the “Tai Chi entity” to distract regulators, including the SEC, FinCEN, CFTC, NYDFS, and OFAC, Forbes alleged.

The document also included strategies to educate potential customers on evading geographic restrictions through technology like VPNs.

The article claimed that the unnamed company was established in the U.S. to “execute a bait and switch” while pretending to be regulatory compliant. However, the plan is to move revenue and profit via obscure means like licensing fees and others to the parent company, Binance. 

Last September, Binance announced the launch of a U.S. complaint subsidiary dubbed Binance.US. The subsidiary is mainly for U.S. customers. It does not support highly leveraged crypto derivatives products, Binance.com. Following the launch, the company restricted all U.S. traders from using the main trading platform. 

Forbes believes Binance.US was set up with ulterior motives and is likely the unnamed Tai Chi entity described in the leaked document. 

Working With Regulators?

To achieve the goals, the document recommends participating in the U.S. Department of Homeland Security (DHS) Cornerstone Program for detecting weaknesses in the financial systems.

Forbes said it spoke to a DHS’s representative who confirmed that Binance.US participated in the program but as a standard requirement for operating a Money Service Business.

Additionally, both Binance and the US SEC are clients of CipherTrace, a blockchain analytic company funded by the DHS. However, Binance’s contract with CipherTrace states that the exchange chose the analytic company because it is the most suitable tool for the Binance Coin (BNB) and all the assets on the Binance network.

The document outlines several other moves for playing nice with regulators.

Where is Binance Headquarters?

Meanwhile, many crypto traders often wonder where Binance’s head office is located, but the CEO doesn’t really want to reveal that information. 

The Forbes article said Binance is based in the Cayman Islands. But CZ noted in the past that Binance does not have a headquarter because Bitcoin doesn’t have an office, perhaps as a joke. 

However, the company has launched multiple location-focused exchanges worldwide, including the United States, Singapore, Jersey (shutting down Nov 30), United Kingdom, Korea, and Turkey. 

C.Z. Denies Claims, Calls it FUD

CEO Zhao was quick to refute the Forbes claims in a Twitter thread, noting that “the statements and accusations in the article are incorrect.” 

He continued, “The whole article hinges on a 3rd party document. The said document was not produced by a Binance employee (current or ex). Anyone can produce a ‘strategy document,’ but it does not mean Binance follows them.”

C.Z. concluded the thread saying that they do not “acknowledge the alleged document.”

Mandy Williams joined the crypto space in 2016, and since then she has been learning and writing about cryptocurrencies and blockchain technology.