Binance’s Changpeng Zhao just a pirate sailing Nouriel Roubini’s ‘seven C’s of crypto’

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Binance boss Changpeng ‘CZ’ Zhao says he doesn’t care that famed economist Nouriel Roubini publicly called him “a walking time-bomb” who “should not be allowed to operate” his digital asset exchange.

Speaking on a panel at the Abu Dhabi Finance Week confab on Wednesday, Roubini tore a strip off CZ, expressing amazement that the boss of the world’s largest digital asset exchange had been invited to participate in the event. According to Roubini, “there are seven C’s in crypto: concealed, corrupt, crooks, criminals, conmen, carnival barkers and, finally, CZ.”

"This is an ecosystem that is totally corrupt… I can't believe @cz_binance has a license to operate in the UAE," @Nouriel tells CNBC's @dan_murphy on stage at Abu Dhabi Finance Week. pic.twitter.com/3BGEMfx7zc

— CNBC Middle East (@CNBCMiddleEast) November 16, 2022

Roubini expressed further amazement that Binance held a license to operate in the United Arab Emirates, adding that CZ was “banned in the U.K., he’s under investigation by the U.S. Justice Department for money laundering, $8 billion money from Iran, and he’s here on this stage and he has residence in this country. The regulator should be thinking carefully. He’s a walking time-bomb.”

At this point the audience began to applaud, but Roubini was just getting started: “[CZ] should be kicked out of this country. He should not be allowed to operate. I’m sorry to say it’s going to get worse.” Relating the ongoing contagion from the implosion of Binance rival FTX, Roubini said “I think the lesson of the last few weeks, these people should be out of here.”

On the same day, Roubini took to Twitter (NASDAQ: TWTR) to call CZ “that shady character [who] was speaking right before me together with Lunatic Mike Novogratz both of them vomiting their crappy bullshit about collapsing shitcoins. Rats & Roaches.” Novogratz is the CEO of Galaxy Investment Partners who in January got an infamous tattoo representing Terraform Labs’ Luna token, the subsequent collapse of which (in tandem with Terraform’s UST ‘algorithmic stablecoin’) sparked this year’s tsunami of insolvencies, bankruptcies and facepalms.

Me calling for @cz_binance to be kicked out of the UAE while I was live on stage today at the ADGM Crypto day. That shady character was speaking right before me together with Lunatic @novogratz both of them vomiting their crappy bullshit about collapsing shitcoins. Rats & Roaches https://t.co/Hqo6YVViNN

— Nouriel Roubini (@Nouriel) November 16, 2022

It’s not a lie if you believe it

On Thursday, CZ appeared at the Milken Institute’s Middle East and Africa Summit, which was also taking place in Abu Dhabi. Asked to respond to Roubini’s comments, CZ claimed not to care, dismissing Roubini as one of those people “who try to become famous by attacking other people … those people will generally stay poor.” (Sort of like the three-quarters of BTC investors who have lost money on their purchase.)

CZ also accused Roubini of being “very impolite” towards his UAE hosts and that “if anyone is going to be kicked out, it should be [Roubini]” for suggesting courses of action to the regulators in the Abu Dhabi Global Market international financial centre.

CZ went on to claim that Roubini “should not attack industry players with just pure false information,” then proceeded to cite a litany of questionable data points of his own. Regarding Roubini’s ‘banned in the U.K.’ statement, CZ clarified that “we don’t have a license to operate in the U.K. But we’re also not banned. Those two things are a little bit different.”

Binance CEO @cz_binance responds to @Nouriel Roubini’s attack pic.twitter.com/xIHYZMZ8Ez

— CNBC Middle East (@CNBCMiddleEast) November 17, 2022

CZ left out that the U.K.’s Financial Conduct Authority has repeatedly fired shots across Binance’s bow, accusing the firm of operating without local permission, then trying to ‘back door’ into the U.K. market via a subsidiary, while another U.K.-facing offshoot has been accused of filing financial statements that are “grossly inaccurate and lacking in several material respects.” But hey, not officially banned.

CZ didn’t directly address Roubini’s claims of active U.S. regulatory probes, instead insisting that Binance “has 44 state licenses in the U.S. … These are state [money service business] licenses. So, I think that speaks for itself.”

But these 44 licenses are held by Binance.US, which CZ likes to claim is an entirely separate company from the dot-com mothership, and was set up by CZ for the sole purpose of offering a veneer of respectability and propriety and distracting from the dot-com site’s habitual transgressions. Despite its presence in 44 states, Binance.US handles less than 2% of the dot-com site’s transaction volume.

Bon Voyager

Binance.US was the runner-up in September’s auction for the remaining assets of Voyager Digital, the digital asset lending platform that filed for Chapter 11 bankruptcy protection in July. That auction was won by FTX US, but with that company now joining Voyager in the bankruptcy bin, Voyager’s unsecured creditors recently announced that they will hold a fresh auction.

Binance.US is reportedly eager to win this latest auction, despite reports that a U.S. government agency expressed concerns during September’s auction that a successful Binance bid could pose national security concerns.

At the time, Binance spokesperson Patrick Hillman dismissed the concerns of the Committee on Foreign Investment in the United States (CFIUS) as “xenophobia,” claiming that Binance is “a Canadian company owned wholly by a Canadian citizen.” Binance almost immediately walked those comments back, in keeping with CZ’s rigid insistence that Binance, like Bela Lugosi, has no home, opting instead for a nomadic existence, hunted, despised, living like an animal, etc.

Oh, is that my knife in his back? Huh…

Binance will soon find itself under even more U.S. scrutiny as the House of Representatives’ Financial Services Committee announced plans to hold hearings into FTX’s demise—and what role Binance may have played in that demise. Binance is expected to be summoned to testify before the Committee, along with representatives from other exchanges, plus, of course, FTX founder Sam Bankman-Fried.

Binance is viewed as playing a pivotal role in FTX’s implosion, which began with publication of an asset sheet of FTX’s market-maker, the SBF-owned Alameda Research, which showed an over-reliance on FTX’s in-house token FTT. But the market basically shrugged until a few days later, when CZ tweeted that Binance would dump the over half-a-billion dollars’ worth of FTT it owned.

As FTX investors raced to withdraw their account balances, SBF worked out a tentative deal with CZ to bail out FTX. But CZ withdrew the offer a day later, after which FTX began its swift slide into oblivion. While CZ had every right to back out after seeing the holes in FTX’s books, the public rift between CZ and SBF since the latter forcibly bought out the former’s stake in FTX led many to conclude that CZ had manipulated the whole affair to tank a near-peer rival.

Not so, CZ told CNBC on Thursday, claiming that Binance was “never in a battle with [SBF],” dismissing FTX as one of the “smaller exchanges” swimming in Binance’s wake. That said, CZ did hear “some concerns about, you know, him badmouthing us behind our backs in D.C., in other political lobbying circles.”

CZ also claimed that the forced redemption of Binance’s position in FTX—an over one-fifth stake at one point—in 2021 was actually his idea. CZ claimed that “we didn’t want to be entangled, we just want to exit our equity portion.” That’s a far cry from SBF’s version, which centered on FTX’s attempts to secure a license in Gibraltar and CZ’s refusal to share details on his source of funds as a condition of said license. The truth may never be known, given the dubious veracity of these two storytellers.

The dog ate my emails

Whomever Binance sends to speak to Congress had better do a better job than the company’s slapdash response to a similar probe in the U.K. On Thursday, Bloomberg quoted Scottish National Party MP Alison Thewliss, the SNP’s shadow spokesperson for the U.K. Treasury Committee, complaining that the evidence submitted by Binance regarding its possible role in FTX’s demise was “unacceptable.”

Thewliss said Binance didn’t submit the requested internal communications regarding the company’s decision-making process re FTX. Instead, Binance submitted a collection of news articles discussing the situation, which Thewliss said was hardly sufficient and she was sure that “the Committee will be asking more questions to get the details” they seek. Thewliss added that Binance’s behavior could influence how the U.K. treats the overall sector going forward.

Meet the new boss

CZ may publicly lament what has occurred but the net result has made his face nearly inescapable on mainstream media outlets. CZ has clearly been attempting to fill the PR role formerly occupied by SBF, calling for greater regulation (that CZ will ignore) of the sector while proposing a raft of initiatives aimed at minimizing further contagion. These include “forming an industry recovery fund to help projects who are otherwise strong but in a liquidity crisis.”

On Wednesday, Reuters quoted CZ claiming to have received “significant interest” in this fund from other companies in the sector and more details would be forthcoming over the next two weeks. CZ eagerly tweeted the Reuters article to his 7.7 million followers but then deleted the tweet for reasons yet unknown.

Whatever the state of CZ’s proposal, the fact that the sector’s usual suspects have cheered its arrival only further demolishes their precious ‘decentralization’ myth. Face it: CZ is effectively proposing a central bank for troubled digital asset firms, with CZ as its chairman. Congratulations, crypto bros, you’ve officially become what you claimed to despise.

Following this week’s publication of SBF’s lengthy text exchanges with a Vox writer that scratched away his ‘effective altruist’ coating to expose the malignant narcissist sociopath at SBF’s core, CZ is now the figure that many in the mainstream media turn to for insights into what’s going on. God help us, all.

Not everyone will be taken in by CZ’s bland pocket-protector schtick. The likes of Bloomberg and Reuters have shown a determination not to be swayed by CZ’s bland homilies to regulatory compliance and that resolve is likely to stiffen now that the FTX contagion is exposing the lies behind other crypto crooks.

CZ’s 2019 decision to delist Bitcoin SV proved that he’ll do what it takes to hobble a competitor, even if it causes significant damage to retail investors. It almost doesn’t matter whether or not CZ played a role in SBF’s comeuppance; the enhanced scrutiny of the entire sector will ultimately come back to bite Binance on its noncompliant ass.

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Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.