- What is Binance and who founded the exchange?
- Binance vs. the SEC: A Brief Explanation of Their Legal Battle
- The November 2023 Verdict, Changpeng Zhao Guilty Plea and Binance to pay $4billion in Fines
- How The Crypto Market is Reacting To The News
What is Binance?
Binance was founded in 2017 by Changpeng Zhao, an entrepreneur, investor, and software engineer. Now considered the largest cryptocurrency exchange globally, Binance offers a multitude of services in the crypto space. These include cryptocurrency trading, an NFT marketplace, digital assets research, and providing venture capital support for Web 3 projects.
It's worth mentioning that Binance handled a significant portion of the crypto market trades last year, accounting for up to 70%. However, due to increased regulatory scrutiny, its market share has experienced a decline. Nevertheless, Binance still retains a notable position, processing approximately 50% of the monthly cryptocurrency exchange volume.
In response to regulatory issues in the United States, Binance faced allegations of violations in 2019. To address this situation, the company took measures by restricting Americans from using its primary exchange, Binance.com. Instead, they established Binance.US as a separate platform tailored specifically for users in the United States.
Although Binance.US offered a narrower range of cryptocurrency and digital options compared to the main platform, it was positioned as an entirely distinct entity from Binance.com. This separation allowed Binance.US to operate under U.S. laws and comply with regulatory requirements for a legitimate presence in the country.
Binance vs. the SEC: A Brief Explanation of Their Legal Battle
On 5th June 2023, the Securities and Exchange Commission charged Binance, its U.S. affiliate Binance.US and founder Changpeng Zhao with thirteen counts of security violations.
These allegations include calculated law evasion, lack of proper disclosure, and conflicts of interest.
Read the full SEC allegation document here.
Gurbir S. Grewal, Director of the SEC's Division of Enforcement, said, "We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximise their own profits."
SEC is also suing Binance for trading unregistered securities, including Simple EARN, BNB Vault, Binance USD (BUSD) and Binance Coin (BNB) in the United States.
Read the full coverage of why the SEC is suing Binance here :
Binance officially responded to the SEC's 13-count charge with an official statement on their blog. In the statement published on Monday, 5th June 2023, Binance expressed disappointment with the SEC's decision to file a complaint against them.
They claimed to have cooperated with the SEC's investigations and engaged in discussions for a settlement. They also stated that they intend to defend their company fully and criticised the SEC's lack of clarity and guidance for the digital asset industry.
The November 2023 Verdict, Changpeng Zhao Guilty Plea and Binance to pay $4billion in Fines
Binance founder Changpeng Zhao, also known as CZ in the crypto community, pleaded guilty on Tuesday, 22nd November 2023, to federal charges.
As a result, Zhao will be stepping down from his role as the CEO of Binance and will be required to pay a substantial fine of $200 million.
Though Zhao faces a maximum sentence of 10 years behind bars, the actual duration is expected to be considerably lower. Federal guidelines suggest a possible sentence of around 18 months, which a judge will ultimately decide.
Furthermore, Binance admitted to participating in activities such as anti-money laundering, unlicensed money transmitting, and sanctions violations.
Authorities, after an extensive years-long investigation, allege that Binance allowed illicit transactions by bad actors on its platform, including crimes involving narcotics and terrorist financing.
To resolve these charges, Binance has agreed to a coordinated settlement with multiple government agencies, amounting to a staggering $4 billion in fines and penalties.
As part of the plea deal, Zhao has agreed to pay $50 million in criminal fines and an additional $150 million in civil penalties, according to the Commodity Futures Trading Commission. Binance is also obligated to disgorge $1.35 billion of ill-gotten gains and pay a $1.35 billion civil monetary penalty to the CFTC.
The coordinated settlement involves several government agencies, including the Justice Department, Treasury's Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Asset Controls (OFAC), and the Commodity Futures Trading Commission.
Alongside the announcement of the settlement, Zhao confirmed in a post on X (formerly known as Twitter) that he has officially stepped down as CEO.
In his statement, he acknowledged the emotional difficulty of this decision but recognised it as the right course of action. Taking responsibility for his mistakes, Zhao expressed his belief that stepping down is in the crypto community's best interest, Binance, and himself.
Read the complete statement here:
Richard Teng, who previously served as Binance's global head of regional markets, will succeed Zhao as the CEO.
How The Crypto Market is Reacting To The News
Following the resignation of Changpeng Zhao, the initial market response was relatively subdued. Bitcoin experienced a minor slip of just over 1% on Tuesday afternoon, which is relatively insignificant considering the crypto market's known volatility.
However, Binance Coin (BNB) experienced a drop in its price, specifically by 8.39%, resulting in it being traded at $244. This decline caused a significant number of long contracts on BNB to be liquidated, which means that holders of these contracts had to sell their positions at lower prices.
Following the news about Binance and the drop in BNB price, there was an increase in activity in the options market. Specifically, there was a rise in topside Bitcoin call options.
Call options give holders the right to buy an asset at a specified price within a certain timeframe. This increased interest in topside call options suggests that there is a persistent bullish sentiment, meaning traders believe the price of Bitcoin will continue to rise.
Paradigm, an over-the-counter institutional cryptocurrency trading network, reported a growing interest in loading up on topside options, particularly for the March 2024 expiry calls. This indicates that there is anticipation among traders for a continued price rally for Bitcoin in the upcoming months.
This optimistic sentiment possibly stems from the belief that U.S. regulators have made strides in cleaning up the cryptocurrency industry, which may pave the way for the approval of the first U.S.-based exchange-traded fund (ETF) focused on cryptocurrencies. If approved, this spot-based ETF is expected to attract billions of dollars from investors into the crypto market.
Investors and industry insiders are eager to see the cryptocurrency space evolve beyond its early days and the influence of individual founders.
The focus now lies on gauging whether cryptocurrencies are maturing into an industry that extends beyond the influential founders who have shaped its trajectory thus far.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.