The operator of the cryptocurrency exchange Binance Holdings Limited, in 2018, devised a strategy to deliberately mislead regulators and extract hidden profits from US customers. This follows from a document obtained by Forbes.
The document titled «образование [simple_tooltip content=’Один из видов боевых искусств в Китае, подразумевающих использование массы тела противника против него самого’]Тай-чи[/simple_tooltip]» contains a roadmap for using the US-based subsidiary, later transformed into Binance.US, for these purposes.
«When the company begins operations in the United States, to distract regulators with a veneer of compliance, steps will be taken to move revenues to the Binance parent. All this time, prospective customers will be trained to bypass geographic restrictions», the strategy states.
Diagram of the relationship between Binance and its US subsidiary. Source: Forbes.
Unlike Binance.com, Binance.US, the regulated entity, does not offer high-leverage crypto derivatives trading.
The publication’s sources say the author of the document was the well-known serial entrepreneur and former exchange employee Harry Zhou. The presentation to Binance’s chief executive Changpeng Zhao was delivered by mergers and acquisitions manager Jared Gross.
A phased plan
The presentation comprises four main sections: aims, the proposed corporate structure, the plan for engaging with regulators, and the long-term licensing plan.
The file is titled “Presentation 2,” which suggests there may be other versions. Yet many tasks described in the slides have already been implemented.
The immediate aim was to soften enforcement practices. The document describes a detailed strategy to deflect attention from FinCEN, the Office of Foreign Assets Control (OFAC), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the New York State Department of Financial Services (NYDFS).
Cooperation with regulators
To this end, it was necessary to join the Department of Homeland Security (DHS) programme for identifying weaknesses in the financial system. The department confirmed Binance.US’s participation. Officials cited the standard licensing procedure for providers of money-transfer services.
Subsequently Binance became a client of CipherTrace, a DHS-funded analytics firm. The cryptocurrency exchange said this supported tools being developed for Binance Coin (BNB) and tokens on the Binance network.
In the corporate-structure section it is noted that the “Education Tai-Chi” should absorb nominal penalties to avoid more serious trouble with authorities. It also envisaged cooperation with the SEC, CFTC and NYDFS “without expectations of success,” in order to “demonstrate willingness to comply with regulatory requirements.”
The company was also intended to join the Winklevoss brothers’ Virtual Commodities Association, but subsequently became a member of the Chicago DeFi Alliance and the Chamber of Digital Commerce. In August Binance.US joined the Blockchain Association.
The document contains a direct call for the “strategic” use of VPNs as a way to evade regulator oversight by the SEC and NYDFS.
Forbes has established that the strategy is not unique to Binance; it is reportedly common among Binance partners. The publication does not rule out investigations by the FBI and the United States Internal Revenue Service (IRS) into the company.
Reaction from Zhao
Changpeng Zhao declined to comment for Forbes, but after publication described it as [simple_tooltip content=’Тактика психологической манипуляции, заключающаяся в подаче сведений о чем-либо таким образом, чтобы посеять у аудитории неуверенность и сомнение в его качествах и вызвать страх перед ним.’]FUD[/simple_tooltip].
Binance has always operated within the boundaries of the law, and this is evidenced by the many international exchanges we’ve helped launch in countries like the US, SG, JE, UK, KR and TR.
2/7— CZ Binance (@cz_binance) October 29, 2020
«We do not acknowledge this document. Binance’s steps demonstrate commitment to doing things right», Zhao added.
We do not acknowledge the alleged document. @Binance, together with our local partners’ actions of getting registered, licensed and regulated in multiple jurisdictions prove our commitment in doing things right.
6/7— CZ Binance (@cz_binance) October 29, 2020
«We do not acknowledge this document. Binance’s steps demonstrate commitment to doing things right», Zhao added.
ForkLog previously reported that Binance-affiliated companies are registered in both the Cayman Islands and the Seychelles.
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