Binance CEO Hires Lawyers as Feds Probe ‘Egregious’ Conduct
Binance’s CEO has reportedly hired a white-collar defense firm amid increased legal pressures.
That’s according to a report Wednesday (April 26) by The New York Times that looks at the “tightening legal net” surrounding the world’s largest crypto exchange.
Among the threats: a Justice Department investigation into possible money laundering. A probe by the Securities and Exchange Commission (SEC) into Binance’s business practices.
And a suit filed last month by the Commodity Futures Trading Commission (CFTC) accuses the company and founder/CEO Changpeng Zhao of circumventing U.S. compliance rules to maximize profits.
Amid all this, Zhao has apparently hired the firm of Latham & Watkins to defend him personally, per the Times report. PYMNTS has contacted Binance for comment but has not yet received a reply.
The Times report notes that criminal charges against Zhao or Binance could trigger a crypto market panic in an industry still shaken by the collapse of FTX — a much smaller exchange — in the fall of 2022.
“It’s the biggest exchange for crypto, and if it gets clamped down on, that’s going to be a big deal,” Hilary Allen, a crypto expert at American University, told the NYT. “It’s hard to see the rest of the crypto industry remaining unscathed.”
The report also quotes attorney Aitan Goelman, a one-time CFTC enforcement director, who argues the conduct described in the CFTC’s complaint puts Binance in a different category from rival crypto firms.
“The misconduct is egregious enough that you would think the Justice Department would be interested,” Goelman said.
Nevertheless, the CFTC is apparently open to working with Binance.
“We’ve been in continuing conversations with the business to describe what we understand is potentially problematic conduct and to give them an opportunity to explain that conduct and to help us find a path forward,” Kristen N. Johnson of the Commodity Futures Trading Commission (CFTC) said in an interview Tuesday (April 25).
Also Tuesday, Binance.US abandoned its plans to purchase bankrupt crypto firm Voyager, according to a court filing.
Binance.US — which is a separate entity from Binance Holdings but still majority owned by Zhao — is itself at the center of the many controversies surrounding Binance.
An investigation last month by The Wall Street Journal alleges that Binance created Binance.US as a way to protect itself from financial regulators.
A spokesperson for Binance told PYMNTS at the time “that Binance.com and Binance.US shared the same ultimate beneficial owner which has been public knowledge since inception.Binance.US however has recently gone through a funding round, whereas Binance.com has not.”