Binance CEO Changpeng Zhao has responded to the CFTC charges, as the world’s largest exchange saw depositors withdraw large sums following the news of the charges brought against the company.
Users ended up withdrawing around $400 million in 24 hours.
Zhao Responds To Charges
The CEO of Binance, Changpeng Zhao, has reacted to the charges brought against the cryptocurrency exchange by the Commodity Futures Trading Commission (CFTC). Zhao called the accusations “unexpected and disappointing” and denied any wrongdoing on his or the exchange’s part. Zhao’s disappointment was further exasperated because the exchange had been cooperating with the exchange over the past couple of years. Zhao went on to add,
“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.”
The Allegations Against Binance And Zhao
The CFTC, on the 27th of March, 2023, hit Binance with a barrage of accusations in a lawsuit, accusing the CEO of indulging in insider trading and evading KYC (Know Your Customer) regulations. The charges also included allegations that Binance had been trading on its own platform, in addition to claims that there were 300 “house accounts” directly or indirectly owned by Zhao.
However, the Binance CEO flatly denied the allegations, stating that Binance does not and never will trade for profit or “manipulate” the market under any circumstances. He went on to add that all company revenues were in crypto and needed to be converted into fiat from time to time to cover expenses related to the functioning of the platform. Zhao stated,
“Personally, I have two accounts at Binance: one for my Binance Card and 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.”
The term “eat your own dog food” is an expression used to refer to companies that use their own products or services to ensure the smooth functioning of their internal operations. Additionally, Zhao stated that Binance had implemented a 90-day no-trading rule for all employees. This meant that employees could not, under any circumstances, sell a coin within 90 days of their most recent purchase.
What About KYC Allegations?
Another set of allegations by the CFTC stated that Binance had been evading KYC controls and regulations. However, Zhao countered by stating that Binance was the first global crypto exchange that implemented strong and mandatory KYC regulations on the platform. He also added that Binance.com blocks all US-based users based on location and IP address. However, the CFTC accuses the exchange of encouraging US-based traders to use VPNs (Virtual Private Networks) to bypass any blocks.
As expected, markets have felt a chill thanks to the developments, with around $30 billion leaving the crypto space in the past 12 hours. As a result, the market capitalization has dropped to $1.17 trillion. The platform itself found itself in the doldrums as depositors, panicking due to the charges brought by the CFTC, withdrew around $400 million on Ethereum, according to data sourced by Nansen. According to the Nansen data, “Savvy Traders” have also moved $9 million from Binance over the past 24 hours.
The developments show the skittishness of traders in the crypto space in the face of regulatory uncertainty. Furthermore, Paxos, a former issuer of the BUSD stablecoin, burned over $155 million worth of BUSD in four hours, citing investor flight.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.