On September 7, CZ issued a tweet acknowledging “a lot of negative news/rumors, bank runs, lawsuits, closing of fiat channels, product wind downs, employee turnover, exit markets, etc.” involving his company. CZ insisted that Binance wasn’t facing any liquidity issues and was winning court cases, establishing new fiat payment rails, hiring new staff, and entering new markets.
FTX & Binance:
🚩 Auditors fled
🚩 100s shelcos
🚩 $BNB = $FTT
🚩 Fake KYC/AML
🚩 Lie about audits
🚩 Users ignored 🚩's
🚩 Media ignored 🚩's
🚩 Joint FTX biz partners
🚩 Same fraudulent banks
🚩 Commingled customer $
🚩 Massive stablecoin fraud
Will you get out in time? 💣 pic.twitter.com/Z6VX0NlCZJ
— Parrot Capital 🦜 (@ParrotCapital) June 24, 2023
We’re still trying to figure out which court victories CZ is talking about unless he successfully challenged a parking ticket or something. If he considers efforts to stall production of documents in the U.S. Securities and Exchange Commission (SEC) civil suit against Binance for securities law violations to be a ‘victory,’ that’s a pretty good indication of how bleak things must look at Binance’s imaginary HQ.
On that same score, consider that CZ felt the need to offer a comparatively detailed rebuttal to bad news. He traditionally dispatches this with no more effort than tweeting the number ‘4’ (referencing an itemized New Year’s resolution list in which ‘4’ represented a pledge to ignore inconvenient truths).
As for the liquidity issues, Binance has been losing fiat payment processing partners faster than Vivek Ramaswamy is losing political credibility. That might explain why Binance tweaked its site layout to make it harder for customers to find the ‘withdraw’ and ‘sell’ buttons, because they totally have all their customers’ cash stashed away somewhere, possibly down the back of the sofa, just give them a sec.
As for hiring staff (to replace the thousands they recently laid off), consider the nonstop parade of senior executives pulling their ejection levers. Late last month, Bloomberg reported that Binance’s Asia-Pacific chief, Leon Foong, had left the building for unclear reasons. Binance Product Lead Mayur Kamat announced his departure last week after only 18 months, around the same time Helen Hai, executive VP and Head of Global Fiat, submitted her walking papers.
Dasvidaniya, Changpeng Shengkaiovich
But perhaps the most significant exits came on September 6 with news of the departures of Gleb Kostarev and Vladimir Smerkis, Binance’s head of Eastern Europe and Russia and general manager for Russia and the Commonwealth of Independent States, respectively. Both men released statements that offered few specifics on what prompted their exits.
However, these departures closely followed reports that Binance was considering exiting the Russian market entirely, which followed reports that Binance was facilitating Russian individuals and entities’ evasion of economic sanctions imposed after Russia invaded Ukraine last year.
That would put Binance squarely in the sights of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which has the power to impose truly punitive financial penalties on sanctions evaders and those who assist them. Sealed filings in the SEC v Binance civil suit hint at something wicked coming that will almost certainly involve the U.S. Department of Justice (DoJ) filing criminal charges against CZ & Co.
Predictably, Binance played coy regarding its Russian operations post-invasion. In April 2022, Binance declared that “as soon as the war started, we stopped working in Russia.” But it quickly became apparent that Binance’s definition of ‘working’ was somewhat elastic. Similarweb Data shows that Russia still supplies more traffic to Binance.com than any other nation.
In response to recent reports that Binance’s P2P platform was working with Russian banks, Binance initially denied these reports, only to purge the five banks less than a week later, saying it acted “when gaps are pointed out to us.” In other words, Binance can always be counted on to slam the barn door long after the korovas have bolted, but you have to tell Binance the door’s been left ajar, because that’s not something they monitor themselves.
Squeal now or forever hold your peace
Former SEC enforcement director John Reed Stark has offered his take on Binance’s inability to keep top executives from bolting. Stark believes the departed individuals likely fall into one of two categories: disgruntled or terrified (possibly both).
Binance Leadership Exodus Creates Unique and Fruitful Opportunities For Law Enforcement
For a relatively young company, Binance appears to have an unusually lengthy laundry list of departed senior employees, who have now unwittingly and instantaneously transformed themselves… pic.twitter.com/8e9YhNKAe2
— John Reed Stark (@JohnReedStark) September 7, 2023
The latter was on full display in the U.S. Commodity Futures Trading Commission (CFTC) civil suit against Binance, which included a former chief compliance officer telling a colleague that “there is no fking way in hell I am signing off as the cco for the ofac shit.”
Stark said the exiting executives “unwittingly and instantaneously transformed themselves into ideal fodder for secret government cooperation deals.” Their detailed knowledge of how Binance makes its sausage means they can “meticulously map out potentially fraudulent conduct, can easily identify possibly complicit parties, can lead prosecutors to other compelling witnesses, and can provide terabytes of inculpatory documents, emails, texts, Signal messages, etc.”
But Stark cautioned that the deluge of departing staff need to recognize that “only the first in line get the opportunity to sign” favorable plea bargains. Those who fail to grasp the urgency of this situation “not only create the extraordinary risk of being left with no protection from prosecution, but they must also undoubtedly endure agonizing uncertainty, waking up every morning with the unsettling notion that they could be arrested at any time.”
To this, we’d like to add similar advice the legal writers at Slate offered Kenneth Chesebro, one of Donald Trump’s co-conspirators in the Fulton County election interference criminal case, if they were his attorneys:
“You are at a critical crossroads, one where your decision in Georgia now will impact the rest of your life. And we would urge haste. The earlier you cooperate in Georgia and with the federal authorities, the more valuable to them you are, and, crucially, the more likely you are to preserve your liberty. At least one (and probably several) of your co-defendants in Fulton County will cooperate with the government … the odds that none of them will cooperate are exceptionally low. Cooperators will make your acquittal in Georgia and in the federal case that much harder to obtain.”
Finger cutting, money laundering
A different Bloomberg report this week offered potential clues as to why Belgium’s financial authority ordered Binance to cease and desist all digital currency operations in the country a couple of months ago.
Bloomberg reported that Belgian authorities are trying to extradite Caio Marchesani from the U.K. for laundering drug trafficking proceeds for various high-profile criminals. These include Flor Bressers, aka the ‘finger cutter’ (no points for guessing why), who relied on Marchesani to launder drug money through 14 different Binance accounts. (Yes, 14 accounts. Binance’s historical aversion to adequate ‘know your customer’ controls reigns supreme.)
Marchesani also laundered funds for Sergio Roberto De Carvalho, a Brazilian national who has been likened to Pablo Escobar. Both drug kingpins were arrested in 2022, while Marchesani was arrested in the U.K. in May. At the time, Marchesani had in his possession around £1.5 million ($1.9 million) worth of digital assets along with “very large” stacks of cash.
In typical Binance style, the exchange pretended to leave the Belgian market after being ordered out in June, then announced it would continue to serve Belgian customers via a Polish-registered offshoot. But perhaps this latest media report linking Binance to drug traffickers (again) convinced CZ that additional half-hearted homages to compliance were in order.
Binance just announced that Belgian customers would lose the ability to traffic, sorry, trade certain ‘privacy coins’ (Monero, MobileCoin, Firo, and Horizen) as of September 21. Binance previously announced similar restrictions for customers in France, Italy, Poland, and Spain that took effect in June, but apparently, Binance felt no urgency in applying these strictures to a market where the financial regulator had been mean to them.
So far behind he thinks he’s ahead
Undaunted, CZ participated in an Ask Me Anything session on X on September 1, in which his reality distortion field dismissed the steady drip of bad news. CZ declared that Binance was “a much stronger company today than we were two years ago, I think.” Unable to leave well enough alone, CZ insisted that Binance was “way ahead of the game in terms of regulatory compliance.”
CZ added that it was “a bit unnecessary” for courts to be deciding regulatory questions, omitting that this situation was in part driven by Binance’s demonstrated belief that it was beyond any regulator’s oversight. The blatant illegality of Binance’s actions across its six-year history offers all the evidence one needs to determine that, left to its own devices, Binance will always choose the path that makes the most money, regardless of how criminal that path might be.
A new hope
We probably shouldn’t expect Binance’s former ‘chief of strategy’ (aka PR flack) Patrick Hillmann—who resigned in July—to be among the former Binance executives seeking a plea deal with U.S. authorities. Hillman recently saw fit to rush to CZ’s defense in a lengthy tweet thread that tried to shift the focus onto the “relatively positive news” involving his former employer.
Like CZ, Hillmann didn’t offer specifics on all these allegedly positive developments. However, he did offer a glimpse into the future, claiming that Binance “will certainly look very different in five years, but so will much of the industry. That is not a negative outlook.”
We concur, although probably not for the same reasons as Hillmann. We imagine a digital asset landscape with a vastly reduced presence of criminals, scammers, and thieves. For that to happen, Binance and the other members of the Crypto Crime Cartel have to go.
Recent digital asset market data from Kaiko shows Binance is handling nearly two-thirds of global trading volume in BTC, ETH, and the top 30 ‘altcoins’ this year, up from 38.3% in 2021. Much of that is wash trading intended to pump the price of certain tokens and lure in unsuspecting retail customers to serve as exit liquidity. But hey, don’t sell Binance short. A lot of that volume is legitimate trading by criminals looking to muddle the trail of their ill-gotten gains.
Yes, the market will look very different once the likes of Binance, Tether, and the perpetually up-to-no-good Justin Sun are either in mothballs, in hiding, or in handcuffs. Yes, some other sketchy exchanges, unbacked stablecoins, and utility-free token projects will try to fill that void, but maybe, just maybe, the world will finally have had enough of the speculative crypto casinos. And maybe, just maybe, we can get back to the idea of peer-to-peer electronic cash on a truly scalable and legally compliant blockchain serving some practical purpose beyond ‘number go up.’
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of group—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
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.
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