Changpeng Zhao: Which billionaire behind Binance is being sued by a US regulator?

The most influential person in cryptocurrency came under fire on Monday from the U.S. Securities and Exchange Commission.

Changpeng Zhao, the creator of Binance, was charged by the SEC of running a “web of deception,” and 13 offenses were brought against him and his exchange.

These included mixing and diverting billions of dollars in client cash “as they please” in addition to allegedly manipulating Binance’s trading volumes and failing to exclude U.S. users from its unregulated platform.

The lawsuit poses a new danger to Zhao’s enormous corporate empire, which has long dominated the cryptocurrency sector. The U.S. Commodity Futures Trading Commission has already brought charges against the multibillionaire entrepreneur, and the Justice Department has also been looking into his transaction.

Zhao’s lofty objectives are now clashing with the relentless attempts of American authorities to rein in a corporation that they claim has grown to a gigantic size by routinely flouting American regulations.

Binance responded to the SEC’s accusations by saying: “We intend to vigorously defend our platform,” adding that the SEC’s proceedings “are limited in reach because Binance is not a U.S. exchange.” Any claims that user assets have been in danger, according to Binance, “are simply false.”

Zhao has had high dreams ever since he launched Binance in Shanghai in 2017. That year, he said in a business chat group to the workforce, “We want to take over the entire market!”

While he was building up his cryptocurrency exchange, the CEO, 46, didn’t let his convictions waver. Zhao believed he was close to achieving a significant objective this year: a seat at the financial industry’s executive table.

The billionaire said in January in an assessment of the previous year, “The idea that a five-year-old start-up could mature and operate at the same level as a financial institution that has been around for 200 years was once impossible to fathom.”

But today, we are almost there.

After the SEC’s move, that ideal seems farther away.

Binance praised its success in flouting laws throughout the globe in the evaluation of 2022. The exchange claimed to have worked all year to improve customer verification by assembling the “best security and compliance team” in the cryptocurrency industry.

Zhao and Binance, however, “consciously chose to evade” U.S. regulations “in an effort to maximize their own profits,” the SEC claims.The SEC said that this “put their customers and investors at risk,” noting a variety of activities that were first exposed by Reuters in a series of investigations on the exchange that were published this year and in 2022.

SEC Chair Gary Gensler said that “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”

According to Reuters, the U.S. Justice Department has been looking into Binance for potential money laundering and breaches of criminal sanctions. Some prosecutors think they have enough evidence to indict Zhao and other key executives. At the time, Binance said it had no inside knowledge of the DOJ’s operations.

“ZHAO REPLIES TO NO ONE,”

Zhao said in a blog post from last year that he was born in China and moved to Canada in 1989 when he was 12 years old, two months after China’s crackdown on pro-democracy protestors in Tiananmen Square.

The businessman, who goes by the initials CZ with his team and online fans, has traveled the world in search of success, working in Tokyo and New York before relocating to Shanghai, where he adopted cryptocurrency and launched Binance in 2017.

There was a significant growth.

According to research company CCData, Binance rose to become the largest cryptocurrency exchange in the world within six months and currently represents over 60% of all trade volumes worldwide. However, the exchange has always declined to reveal the location of its trading platform.

According to a Reuters investigation from last year, Zhao maintained a firm hold on Binance from the organization’s first days as a strong leader devoted to confidentiality and focused on market dominance.

Zhao put his close-knit group of acquaintances, many of whom had worked or studied in China, in positions of authority. Co-founder Yi He now oversees Binance’s $7.5 billion venture capital division in addition to other crucial divisions. Zhao gave responsibility for overseeing the business’s finances to Guangying Chen, his head of back office who is Chinese-born. According to Reuters’ investigation from last month, this included a number of accounts Binance created with the since-defunct U.S. institution Silvergate Bank.

Reuters discovered that Binance combined consumer cash with business earnings in one of these accounts, which belonged to a trading company named Merit Peak that Zhao controlled. The funds were then used to purchase the exchange’s unique dollar-linked crypto currency. In its case, the SEC made a similar claim.

Chen also managed the bank accounts for Binance.US, a supposedly autonomous subsidiary of Binance, enabling Zhao to oversee the company’s growth in the American crypto market as well, according to Reuters on Monday.

Zhao continues to have tight control over his firm, despite the fact that Binance has recently recruited several people from the conventional financial and regulatory sectors. Zhao personally controls the majority of the at least 70 businesses the corporation, which refers to itself as a “ecosystem,” has established.

In its March lawsuit, the CFTC said that Zhao had no one but himself to answer to.