Mar 27, 2023 View in browser BY BEN SCHRECKINGER Presented by TikTok With help from Derek Robertson Binance CEO Changpeng Zhao. | AP The big news today is a new federal lawsuit brought by the Commodities Futures Trading Commission that lodges a slew of regulatory violations against Binance. Like FTX, Binance is an offshore crypto exchange with a tamer U.S.-based offshoot that complies with U.S. regulations. The version of Binance available to the rest of the world allows for riskier, more exotic forms of crypto trading. But as of 2020, roughly one-in-six users of the much-larger offshore exchange were Americans who had evaded the ban, according to numbers cited in the complaint. While the exchange’s flamboyant founder, Changpeng Zhao, currently works out of Dubai, the exact location of Binance, and as a result who has authority to regulate it, has been something of a puzzle. Initially based in China, it moved much of its operations to Japan ahead of Beijing’s 2017 crypto crackdown. But Zhao has said in the years since that the company has no particular headquarters, a stance that has served to keep the exchange’s regulatory status murky. The CFTC’s complaint, which cites statements from an internal company meeting in 2019, alleges the practice is an intentional effort to defy legal oversight anywhere, not just in the United States. Well, according to the CFTC, Binance is subject to its legal oversight even though the exchange targeted in the lawsuit is supposed to only operate outside of the U.S. That’s because Binance is allegedly complicit in helping U.S. customers shirk the existing ban on that exchange, including by instructing them to use virtual private networks to disguise their locations. The crackdown on Binance’s alleged role in bringing American customers onto its offshore exchange serves to put a brighter line around the boundaries of U.S. jurisdiction. It’s one of several moves by regulators and financial firms in recent weeks that are nudging the industry towards a future in which there is a clear separation between a regulated crypto sphere in the U.S. and a more free-wheeling offshore version. That would create room for big banks and other established financial institutions that were slow to adopt crypto to get a bigger piece of a more heavily regulated domestic market. Last week, Coinbase, the world’s second-largest crypto exchange, revealed that the Securities and Exchange Commission had notified it of its intent to bring charges as the regulator and the industry face off over which crypto tokens must be registered as securities. Earlier this month, Bloomberg reported that U.S.-based Coinbase is considering the creation of an off-shore exchange to sidestep domestic regulatory risks. With all this legal uncertainty around post-crash crypto, more staid financial institutions are keeping well clear of digital assets, right? Not quite. The asset manager Fidelity rolled out Bitcoin and Ethereum trading to retail customers in eligible U.S. states a couple of weeks ago. And on Friday, Bloomberg reported that Nasdaq is on track to launch a crypto custody service for institutional investors by early summer. There’s a widespread suspicion in crypto circles that the ongoing crackdown is meant to clear the field for the creation of a digital dollar. But Washington’s progress towards a digital dollar has been slow, tentative, and constrained by a patchwork of competing political interests. Instead, one plausible consequence of all of this action is a more bifurcated global landscape in which a Wild West atmosphere continues to prevail offshore, while inside the U.S. established financial players increasingly muscle their way in on a tamer version of crypto.
https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282 CZ’s Response to the CFTC Complaint 2023-03-27 Today, the CFTC filed an unexpected and disappointing civil complaint, despite our working cooperatively with the CFTC for over two years. Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint. While we will only be able to give full responses in due time, we will address a few key points below. Technology for Compliance & US Blocks. Binance.com has developed best-in-class technology to ensure compliance. Binance.com is the first global (non-US) exchange to implement a mandatory KYC program, and remains today to have one of the highest standards in KYC and AML. We block US users by nationality (KYC), IP (including commonly used VPN endpoints outside of the US), mobile carrier, device fingerprints, bank deposit and withdrawals, blockchain deposits and withdrawals, credit card bin numbers, and more. We are aware of no other company using systems more comprehensive or more effective than Binance. Cooperation and Transparency with Law Enforcement. Binance is committed to transparency and cooperation with regulators and law enforcement (LE) — in the US and globally. Binance currently has more than 750 people in our Compliance teams, many with prior law enforcement and regulatory agency backgrounds. To date, we have handled 55,000+ LE requests, and assisted US LE freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far. We intend to continue to respect and collaborate with US and other regulators around the world. Registrations and Licenses. Binance.com holds the highest number of licenses/registrations globally, 16 and counting, and is well regarded by our user community. Trading. Binance.com does not trade for profit or “manipulate” the market under any circumstances. Binance “trades” in a number of situations. Our revenues are in crypto. We do need to convert them from time-to-time to cover expenses in fiat or other crypto currencies. We have affiliates that provide liquidity for less liquid pairs. These affiliates are monitored specifically not to have large profits. Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time-to-time to pay for my personal expenses or for the Card. Binance.com has a 90 day no-day-trading rule for employees, meaning you are not allowed to sell a coin within 90 days of your most recent buy, or vice versa. This is to prevent any employees from actively trading. We also prohibit our employees from trading in Futures. Further, we have strict policies for anyone with access to private information, such as details of listings, Launchpad, etc. They are not allowed to buy or sell those coins. I observe these policies myself strictly. I also never participated in Binance Launchpad, Earn, Margin, or Futures. I know the best use of my time is to build a solid platform that services our users. At Binance, we look for amicable solutions to all problems. We are collaborative with regulators and government agencies all around the world. While we are not perfect, we hold ourselves to a high standard, often higher than what existing regulations require. And above all, we believe in doing the right thing by our users at all times. In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges. We thank you for your unwavering support! CZ CEO @Binance
Binance and Its CEO Sued by CFTC Over US Regulatory Violations; CFTC alleges world's biggest crypto exchange shirked rules; Case was filed in federal court in Chicago on Monday Allyson Versprille, Lydia Beyoud, Tom Schoenberg and Ava Benny-Morrison - Bloomberg The US took its most forceful move yet on Monday to crack down on crypto exchange Binance Holdings Ltd. and its chief executive officer Changpeng Zhao. The Commodity Futures Trading Commission alleged in federal court in Chicago that Binance and its CEO, who is known as CZ, routinely broke American derivatives rules as the firm grew to be the world's largest trading platform. Binance should have registered with the agency years ago and continues to violate the CFTC's rules, according to the regulator. /jlne.ws/3nhT7OO
I heard the CFTC chairman on CNBC today and he had transcripts of employees telling US customers to never get caught using an IP address from the US. CZ obviously doesn't pay his employees enough to shut up. Loose lips sink ships, as they say. Reminds me of the Milken mafia in the Beverly Hills office of Drexel, Burnham & Lambert. Milken used to pay his secretary $200,000 in the early 1980s. All his inner circle make outrageous money for their loyalty but the caveat was they would never cross Milken. He insured it by putting most of their bonus in his LBO pools which made even more money but you couldn't get it out quickly.
I'm now trying to sign up to Binance from the country-which-shall-not-be-named. I could not even try to register until i got a VPN to change my IP address to something other than the country-which-shall-not-be-named. But little good this has done because now, to be able to deposit any amount of any kind of funds, including crypto, i need to verify ID. So what good will it do when i send them my driver's license from the country-which-shall-not-be-named? Won't they just take one look at it and see that I'm not from Belgium? Is this new in response to the CFTC lawsuit? They allege there are customers affected that come from the country-which-shall-not-be-named, but it appears it is not so easy to register from the country-which-shall-not-be-named.
Here's a nine month old article about how people can sign up to Binance Global if they come from the country-which-shall-not-be-named. In the article it does mention sending regular ID from the country-which-shall-not-be-named in the verification process. It implies this was, as of last June, semi-acceptable, with withdrawals limited to .06 BTC per day. It's uncertain if its 2FA, or ID, or both, which enables some of Binance's services to people from the overregulated, civil asset forfeiture crazy, country-which-shall-not-be-named. How to Use Binance in the US | The Ultimate Guide 2023 | CoinStats Blog
Update on signing up with an offshore crypto exchange with a VPN. I was rejected by Binance due to having government issued ID from country-which-shall-not-be-named, and not from Belgium. First they want to know what street address you live on in...Belgium. Then they tell you what government ID to show, from a list that does not include the country-which-shall-not-be-named. It's the same for most any country, a passport, a drivers license, or yet another government issued ID. One of those three. Use camera to photo front and back of license and then take a 20 second video of a headshot, turning head one way and back again, and then speaking three digits. Then asking several questions like where does income come from, what services planning to use on the site, what is one's occupation. So what it comes down to, at least since the CFTC suit, is people from the country-which-shall-not-be-named cannot open an account at Binance global without government issued ID which lines up with a given address of residency in the allowable counties. I also found out that they no longer take anyone from Canada, even though it is Ontario mainly which has caused problems. So instead of excluding Ontarians, Binance excludes all of Canada. Probably Binance would not care if a person from the litigious countries like the country-which-shall-not-be-named made a more convincing effort to pass as a Belgian. It's ridiculous that people from the country-which-shall-not-be-named would have to go out and buy a fake ID, but that's what it has come down to. On the other hand, I got signed up with both Bybit and Fybit with just an email address. I'm pretty sure the VPN was necessary though because i do recall having a problem with either of those before without. I am right now sending a nominal, test amount of BTC to the wallet addresses i was given there. Bybit most resembles Binance with it's software and process, only without the extra KYC. If you're in Binance's shoes, you have to anticipate that FBI and CIA are going to try have their people sign up as customers from the country-which-shall-not-be-named. Binance has to make a convincing effort to appear it is doing everything it can to screen them out. It they were offered a more convincing lie, more than your standard VPN routine, i really don't think they would care.
Can't trust a single word from any of these crypto barons. SBF stole billions in cash, and up until the judge gagged him was still writing Medium posts claiming it was all just a missed decimal point in Excel.