Binance Holdings Limited, the parent company of its namesake digital asset exchange group, has voluntarily dismissed its legal action against Forbes and two of its writers. The November 2020 complaint sought damages over an article that alleged Binance had intentionally created structures to evade U.S. regulators.
The motion to dismiss the case was filed on February 4 and approved by a judge. The four-line notice did not give a reason for dropping the case.
The Forbes article, published in October 2020 and penned by reporters Michael del Castillo and Jason Brett, claimed a leaked 2018 corporate presentation described plans for a new business entity known in-house as “Tai Chi.” Forbes claimed Binance’s later U.S. subsidiary, Binance.us, was a strategic “bait and switch” that would comply with local regulations on the surface and participate in U.S. regulatory programs as a distraction, while funneling U.S. traders’ fees to its parent company in the Cayman Islands. The U.S. entity would even pay “nominal fines” occasionally to show its compliance. The article also alleged there were moves to educate users on how to work around geographic restrictions to use more advanced trading features not allowed in the U.S., such as leveraged derivatives.
Both del Costillo and Brett were named alongside Forbes as defendants in the initial complaint. Forbes stood by its story, in which it said it had agreed not to reveal the source of the “leak.” However Binance at the time strongly denied the document had come from the company or was written by any of its present or former employees. Founder and CEO Changpeng Zhao said the accusations in the article were “incorrect” and “FUD,” adding that “Binance has always operated within the boundaries of the law.”
The legal complaint said the statements of wrongdoing in Forbes’ article were “false and defamatory,” and that Binance had not implemented any of the suggestions made in the leaked document. It also reiterated the claim that the “Tai Chi” presentation was not sourced from within Binance or anyone acting on its behalf. Calling the article “highly damaging,” it added that demands for a retraction and apology from Forbes had been refused, leading to the suit.
“Binance has filed this action to protect its hard-earned reputation and business,” the initial complaint said.
While the Forbes piece acknowledged that companies internally might hypothesize various potential strategies, it noted that Binance had appeared to put at least some of them into action since 2018. These include its participation in the Department of Homeland Security’s Cornerstone program, and using the same DHS-funded blockchain forensics company (CipherTrace) as the SEC.
Whether genuine, partially-genuine or otherwise, the allegedly-leaked presentation document was particularly embarrassing for Binance given its description of moves explicitly designed to avoid and trick regulators. These would no doubt have raised eyebrows in regulators’ offices, and prompted extra scrutiny.
The platform is one of the world’s most-used digital asset trading platforms, and has regularly attracted the wrong kind of attention after proceeds from several hacks and other crimes were found to have moved through its wallets.
Other sources have previously claimed Binance accounts were used to launder over US$1 million from the “Ryuk” ransomware attacks, and some groups reportedly used the exchange to launder money on multiple occasions.
The very nature of digital assets (especially when there are thousands of them) and the exchange platforms they’re traded on mean attempts to launder criminal proceeds using these methods are inevitable. That is why the Bitcoin BSV industry stresses that all blockchain records are permanent and ultimately traceable, and its representatives urge all projects on BSV perform proper KYC/AML procedures on users. Bitcoin was never designed to break laws, and used properly (i.e. with all transactions on-chain) it is actually a very poor way to conceal criminal activities.
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