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SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

593 points by kgwgk 3y ago

smart_jackal 3y ago
[flagged]
- Octoth0rpe 3y ago
  I don't doubt that quite a few politicians were being all warm and fuzzy with various FTX people pre-collapse, but SBF is currently awaiting a long list of expected charges and I don't think anyone doubts that he's headed for jail (excluding some dramatic escape funded by hidden monies). Justice may not have been served, but it's most definitely in progress. Biden's SEC seems to be doing its job in both cases and without prejudice, albeit belatedly.
- JumpCrisscross 3y ago
  > Biden's SEC is doing it merely because of his South Asian origin Zhao is a “Chinese-born Canadian” [1]. Not South Asian [2]. [1] https://en.m.wikipedia.org/wiki/Changpeng_Zhao https://en.m.wikipedia.org/wiki/Changpeng_Zhao [2] https://en.m.wikipedia.org/wiki/South_Asia https://en.m.wikipedia.org/wiki/South_Asia
- deleted 3y ago
  [deleted]
- jaywalk 3y ago
  Come on. I'm no fan of Biden, but your comment doesn't even make sense. SBF is going to jail.
  - SamReidHughes 3y ago
    That was after the company collapsed.
    - mrguyorama 3y ago
      Yes and everyone thought Enron was the greatest until their fraud was exposed. When you have minimal transparency it's really easy to cook the books and look good. That's like half the point of regulations around public companies.
      - SamReidHughes 3y ago
        That is completely irrelevant.
madars 3y ago
Archive: https://archive.is/e1x4l https://archive.is/e1x4l
- hiq 3y ago
  Updated: https://archive.ph/WEoa2 https://archive.ph/WEoa2
bmc7505 3y ago
Isn't CZ already being sued by the CFTC? Is cryptocurrency a security or a commodity and under whose jurisdiction does Binance fall? Or were they trading in both types of instruments? https://news.ycombinator.com/item?id=35327996 https://news.ycombinator.com/item?id=35327996
- JumpCrisscross 3y ago
  > Is cryptocurrency a security or a commodity The SEC complaint sidesteps what Bitcoin or Ethereum are by focussing on other transactions, e.g. the ICO and trading of BNB and the private placements of its own stock.
- wmf 3y ago
  Some cryptocurrencies are commodities and some are securities. Binance was trading both kinds so they get spanked twice.
LatteLazy 3y ago
Still no sign of workable regulations? Better get on an sue everyone for not following rules that don't exist yet...
- JumpCrisscross 3y ago
  > rules that don't exist yet The CFTC complaint shows Zhao et al were perfectly cognisant they were breaking the rules [1]. [1] https://www.bloomberg.com/opinion/articles/2023-03-27/the-cftc-comes-for-binance https://www.bloomberg.com/opinion/articles/2023-03-27/the-cf...
- inthewoods 3y ago
  Binance, Coinbase, et al: "We'd like new rules from the SEC/CFTC to let us crime." SEC: "No." Binance et al: "You're stopping innovation!" SEC: "You're going to jail."
anonu 3y ago
And BTCUSD down sharply on the news... The crypto winter will be a long one. Link is broken. Here's the SEC press release: https://www.sec.gov/news/press-release/2023-101 https://www.sec.gov/news/press-release/2023-101 And the full 136 page complaint: https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
- boring_twenties 3y ago
  It's down ~2.5% to a level last seen ... a week ago. That is not "sharply" by any stretch of the imagination.
  - anonu 3y ago
    "Sharply" is anchored on where the price was just before announcement. Not where it was a week ago... Price moved on the news...
    - boring_twenties 3y ago
      The price regularly moves more than 2.5% on no news at all. This move isn't sharp, it's negligible.
    - EscapeFromNY 3y ago
      For anyone coming across this later, here's what happened a day after BTCUSD moved "down sharply": https://i.imgur.com/GSFU7Mu.png https://i.imgur.com/GSFU7Mu.png Just your average market fluctuation, or at worst an overreaction and immediate correction. It's best not to try to predict long term market cycles from the 1h candles.
  - deleted 3y ago
    [deleted]
- monero-xmr 3y ago
  This is good for bitcoin. CZ, Justin Sun, and all the scammers need to be in prison.
tibbydudeza 3y ago
I presume he is not based or living in the US ???
- JumpCrisscross 3y ago
  > presume he is not based or living in the US Zhao “unlawfully solicited U.S. investors to buy, sell, and trade crypto asset securities through unregistered trading platforms” while “raising approximately $200 million from private investors” and “direct[ing] Binance to assist certain high-value U.S. customers in circumventing…controls and to do so surreptitiously” [1]. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
  - rkagerer 3y ago
    If he's outside the US and the country he is in had an extradition treaty with the US, but has no comparable law in the books, wouldn't that impede extradition?
    - JumpCrisscross 3y ago
      > wouldn't that impede extradition This is a civil complaint. Nobody is demanding extradition as no crimes are alleged. If Zhao is dumb enough to blow off the courts, the DoJ will get involved.
      - c2h5oh 3y ago
        This is a civil complaint, but it describes things that can be criminal, e.g: a failure to do KYC required to block transactions with sanctioned people/entities - that can very much be criminal with a max of 20 years iirc.
        JumpCrisscross 3y ago
        > it describes things that can be criminal There is probably a case, but I don’t see anything that would make Zhao a priority for the DoJ. Maybe that will surface as he responds (or refuses to).
colesantiago 3y ago
This is brilliant. I really want crypto to fade away out of existence and into irrelevance, FedNow is coming soon and we don't need crypto or shady crypto exchanges like Binance. Glad to see the US taking action.
- zarzavat 3y ago
  95% of people don’t have a bank account in the US.
  - misnome 3y ago
    100% of people don’t have a venusian bank account in the US
    - lern_too_spel 3y ago
      That sentence is not saying the same thing. The equivalent would be 100% of people don't have a bank account on Venus.
  - deleted 3y ago
    [deleted]
  - dgfitz 3y ago
    and 77.34% of statistics are made up on the spot. https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-banking-and-credit.htm https://www.federalreserve.gov/publications/2019-economic-we... 6%
    - JumpCrisscross 3y ago
      Parsed generously, 94% of Americans is about 300mm people. That's 4% of the human population. (It's a nonsense argument nonetheless: it's not America's job to bank the world.)
      - dgfitz 3y ago
ftxbro 3y ago
[flagged]
fallingknife 3y ago
I can't see this enforcement spree by the SEC as anything other than malicious when Gensler himself said that 3/4ths of the market is not securities in 2018. https://twitter.com/ZK_shark/status/1650689125580668931 https://twitter.com/ZK_shark/status/1650689125580668931 Yes this was before he was head of the SEC, but the fact that this was going on right out in the open for 10 years and the SEC took exactly no action tells me that the entire agency shared this opinion too. It doesn't take a decade to shut down an unregistered securities exchange.
- JumpCrisscross 3y ago
  > this was going on right out in the open for 10 years and the SEC took exactly no action Ripple was sued in 2020 [1]. That’s two years from Gensler’s 2018 statement and 1 year preceding his becoming chair of the SEC [2]. Note, too, that when Gensler made those statements he was the former chair of the CFTC. And nobody is being charged for cash trading Bitcoin or Ethereum. [1] https://www.sec.gov/news/press-release/2020-338 https://www.sec.gov/news/press-release/2020-338 [2] https://www.sec.gov/about/commissioners/gary-gensler https://www.sec.gov/about/commissioners/gary-gensler
- misnome 3y ago
  Ah yes, the “offhand comment by someone years before they took a position indemnifies you business for all behaviour infinitely into the future no backsies” law
  - fallingknife 3y ago
    If by "offhand" you mean the former head of the CFTC giving a lecture in the class he teaches on the subject at MIT while at the same time the SEC is also not taking any actions against crypto exchanges. There isn't a "no backsies" rule, but then you will have to tell me what changed about crypto between 2018 and now that made it pass the Howey test then and fail it now if you want me to believe that the government is acting in good faith.
    - misnome 3y ago
kalupa 3y ago
dupe https://news.ycombinator.com/item?id=36197712 https://news.ycombinator.com/item?id=36197712
misnome 3y ago
Finally some regulatory clarity
- sebzim4500 3y ago
  Not really, the only assets they have identified as securities here and the ones that were immediately obvious as securities (BNB etc.). They have made no statement regarding BTC, ETH, etc.
  - webXL 3y ago
    Gensler explicitly stated that BTC was a commodity about a year ago: https://www.benzinga.com/markets/cryptocurrency/22/06/27866983/commodity-or-security-new-bitcoin-insights-from-sec-chairman-gary-gensler https://www.benzinga.com/markets/cryptocurrency/22/06/278669...
    - deleted 3y ago
      [deleted]
    - deleted 3y ago
      [deleted]
    - whimsicalism 3y ago
      What a ridiculous statement, ethereum at minimum is a commodity. I think it is also absurd to suggest Dai is a security
linusg789 3y ago
Correct original link: https://www.bloomberg.com/news/articles/2023-06-05/sec-sues-binance-and-ceo-zhao-for-breaking-us-securities-rules#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-06-05/sec-sues-... Archive: https://ghostarchive.org/archive/TiwuL https://ghostarchive.org/archive/TiwuL
- kgwgk 3y ago
  In what sense is the link submitted incorrect?
  - misnome 3y ago
    There was a second thread, since merged, where the link was moved so 404’d
    - kgwgk 3y ago
      Thanks! I missed that - and I thought that maybe removing the #blahblah at the end of the URL had some effect I was not aware of.
deleted 3y ago
[deleted]
gadnuk 3y ago
> In one instance, the Binance chief compliance officer messaged a colleague that, “[w]e are operating as a fking unlicensed securities exchange in the USA bro.” Source: https://twitter.com/JohnReedStark/status/1665748594421297152 https://twitter.com/JohnReedStark/status/1665748594421297152 This is a legendary quote from the filing.
- jeroenhd 3y ago
  I get why you would say something like that in astonishment. By why would you ever send that out over a medium that'll leave a paper trail? Thank goodness that criminals aren't very smart. Their idiocy is doing society a huge favor.
  - mytailorisrich 3y ago
    It's a global phenomenon. People can't abstain from posting online and from sharing on messaging platforms these days. It's even been noticed by contemporary philosophers: https://youtube.com/shorts/Blw2dNZwZzg?feature=share https://youtube.com/shorts/Blw2dNZwZzg?feature=share
    - hef19898 3y ago
      Just imagine the paper trail this new breed of criminals will leave!
  - tedivm 3y ago
    Oh that's easy- this was the compliance officer, and by showing that he raised concerns over this he may be able to claim that he did his job as best he could under the circumstances. I'd need to see the rest of the context, but this could very well be a "cover your ass" message. Imagine if you're a security officer at a company and were just overridden on a decisions- you'd definitely want to shoot off an email describing the issue so that later on you aren't held responsible for it (of course depending on the severity quitting may also be desirable, but not everyone is in a position to immediately drop a job).
deleted 3y ago
[deleted]
- napierzaza 3y ago
  [dead]
legitster 3y ago
Is there any indication that eventually Bitcoin and Ethereum don't eventually get pulled into the "unlicensed security" category?
- HWR_14 3y ago
  I believe there is some indication that the SEC allowed only those two to fall into commodities instead of securities. And that decision may be hard to undo.
- GenerWork 3y ago
  My understanding may be off, but I believe that Bitcoin will be able to avoid it but Ethereum may have a harder time due to the fact that contracts are pretty much baked into ETH at a basic protocol level. I'm sure if I'm wrong someone will correct me.
  - anonporridge 3y ago
    Ethereum will have a harder time because they launched it with an ICO, sought out investors, and the Ethereum foundation explicitly allocated themselves a share of the initial coins. AND now after the migration to proof of stake, ownership of Ether effectively gives you voting rights and administrative control of the network, not unlike a security. Bitcoin was open and permissionless day one for anyone to mine, and Satoshi gave themselves no artificial privileges. The genesis block reward was unspendable. In practice, Satoshi ended up with a huge pile of the coins, but there was nothing that could have prevented the unavoidable obscurity and lack of awareness of such a novel and unproven project. Ownership of coins also doesn't convey any direct administrative privileges in the network. And of course, initially the coins weren't worth anything. There aren't any reasonable arguments that bitcoin is a security, while there are reasonable arguments that ethereum is.
- simple-thoughts 3y ago
  Gensler is a Bitcoin maxi. He tried to walk back the previous head’s statements on ethereum but unfortunately for him it cannot be done easily. However he will do his best to ban all other crypto.
asciii 3y ago
Even though Binance dropped out of the Voyager deal, they still send out recurring email to complete the setup. Not super shady at all Zhao
thepasswordis 3y ago
[flagged]
- sneak 3y ago
  The victims are the large established taxpaying vendors of retail luxury goods that people with disposable income are not squandering their money at (because they squandered it gambling on cryptocurrencies). There is a list of ways the state will allow you to waste your money. Most of the allowed ones involve taxation. Most of the prohibited ones do not.
- lijok 3y ago
  The victim is the tech illiterate grandmother who got sold fake money by an expensive ad, financed by cryptobros who swear up and down they're invested because it's real currency, and not so they can make a profit by indirectly scamming the tech illiterate grandmother
- yxhuvud 3y ago
  > we’ve gotten to the point of It has been the case at least as long as there has been structured governments around.
mgamache 3y ago
Operation Choke Point 2.0 Continues https://cointelegraph.com/news/nothing-is-a-coincidence-with-the-government-claims-us-lawmaker-on-operation-choke-point-2-0 https://cointelegraph.com/news/nothing-is-a-coincidence-with...
- JumpCrisscross 3y ago
  > Operation Choke Point 2.0 Continues Would a web3 proponent getting a traffic ticket also count? We have documented evidence of clear, willful violation of the law. And nobody is seriously mooting a CBDC anymore. (Given Silvergate was (a) downed by FTX and (b) the proximate cause of our recent banking meltdown, it is reasonable to argue Chokepoint 1.0 didn't go far enough. But that's irrelevant to this thread.)
- lottin 3y ago
  For the financial system dealing with cryptocurrencies isn't worth the risk. The banks would have to perform all sorts of AML/CFT checks on every penny that has come into contact with an exchange, and they just don't have the resources to do that.
- smoovb 3y ago
  Here is the fuller playbook of Chokepoint 2.0 from Cooper Kirk: https://www.cooperkirk.com/wp-content/uploads/2023/03/Operation-Choke-Point-2.0.pdf https://www.cooperkirk.com/wp-content/uploads/2023/03/Operat...
I_am_tiberius 3y ago
Not a Binance fan but in this context, and considering the SECs unwillingness of declaring when cryptocurrencies are securities or not, it's pretty clear that they go after Binance for strategic reasons. Not sure but I assume this is controlled by the Biden admin.
- 2OEH8eoCRo0 3y ago
  Isn't that one of the benefits of a lawsuit? The law is tested and needs to hold up under scrutiny.
  - I_am_tiberius 3y ago
    Definitely not when the party who is suing you is the one that defines the rules. Thinking about the scenario of this lawsuit makes me really angry. It's some sort of power demonstration backed by a political strategy.
    - 2OEH8eoCRo0 3y ago
      So they can argue in front of an independent 3rd party called a court.
    - jeremyjh 3y ago
      They are alleging the exchange comingled customer funds and transferred them to another company controlled by Zhao. Why doesn’t that make you angry?
      - I_am_tiberius 3y ago
        That makes me angry as well. It also makes me angry that my bank does something like this with the money I deposit. I doubt this is the pivotal point for that case though.
        jeremyjh 3y ago
        It’s illegal to do this in a brokerage account, and FTX is an example of why. There is no legitimate reason to do it.
alphanullmeric 3y ago
[flagged]
- whateveracct 3y ago
  Point one just sounds like your opinion that securities regulations should not exist. Seems like a little stump-box-y to post in a thread about high-profile, blatant securities law criminality lol.
  - alphanullmeric 3y ago
    [flagged]
    - lern_too_spel 3y ago
      It should be possible for non-consenting individuals to claw back their money when needed, by rules agreed to by the society they live in. Agree or disagree? More than one word, please. A full explanation is required to justify allowing DPRK and Russia to fund themselves by stealing from crypto-fools and innocent bystanders around the world.
      - z3c0 3y ago
        Can you make the same argument without invoking international bogeymen? This is basically one of the aforementioned Patriot Act talking points.
        lern_too_spel 3y ago
        I already did. DPRK and Russia aren't imaginary. https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-russia-ransomware-money-laundering/ https://blog.chainalysis.com/reports/2022-crypto-crime-repor... https://www.nytimes.com/2022/06/30/business/north-korea-crypto-hack.html https://www.nytimes.com/2022/06/30/business/north-korea-cryp...
wslh 3y ago
I remember the last post from Fred Wilson: "The Freedom To Innovate" [1]. Even if the SEC is right about Binance and others, and there are without doubt blatant and huge frauds in Web3, there are huge problems with the financial modernization within the US (and the world). Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina. The SEC is not showing a neutral point of view and any special concerns with innovation and legacy system frauds. It doesn't matter if it is call Web3, blockchain, or whatever buzzword you like, banks have real power and a clash is inevitable now or in the near future. It took a century to dethrone Bell System [2]. It is a political and economical issue, not just an industry. [1] https://news.ycombinator.com/item?id=36199584 https://news.ycombinator.com/item?id=36199584 [2] https://en.wikipedia.org/wiki/Bell_System https://en.wikipedia.org/wiki/Bell_System
- mikem170 3y ago
  > The Freedom To Innovate I'm not sure that innovation in finance has always been a good thing. Over the last 50 years we've seen increased levels of debt, increased college costs, increased housing prices, a bigger and more powerful rentier class, growing income inequality, leveraged buyouts, big business eliminating small businesses, hedge funds buying housing and hospitals, big tech buying up the competition, profit is the name of the game, all of these rich people buying politicians, etc. Who came out ahead after all this? Much of the applied innovation in crypto hasn't been good, either. Block chain is an amazing technology, but the innovators in this space didn't stop at a decentralized money transfer system, they wanted to get rich and they scammed people. So what kind of innovation are we talking about? Who would be helped? > Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina A small aside on this topic: I assume/hope that the new FedNow payment system coming online in a month or so will help with transfers like this.
  - wslh 3y ago
    We don't know if innovation, in general, is a bad or good thing. We assume it is generally a really great thing. Innovation requires time, fifty years is nothing to conclude that the financial system should exist in the same way as existed before.
LatteLazy 3y ago
The SEC and CFTC missed FTX being the worlds largest fraud. Now they are desperately going after Binance for... being above board but not getting the right license, during a period when no licenses were offered (and still aren't). At what point is this just pointless bullshit, let exchanges register, regulate them like other exchanges (segregated funds etc) and fuck off already.
- tornato7 3y ago
  How do we know that Binance is "above board" when they have never published a GAAP audit and their auditors have taken down their "proof of reserves"?
- shkkmo 3y ago
  > being above board SEC has alleged multiple efforts to lie and deceive both regulators and users. It's hard to see how that qualifies as "above board".
  - codehalo 3y ago
    The burden is on SEC to prove these allegations. If they took YOU to court, calling YOU a thief, you would expect the burden to be on them, right?
    - shkkmo 3y ago
      Yes of course. That is why I used the word "alleged". My point stands, the SEC is not going after Binance just for "being above board but not getting the right license".
      - codehalo 3y ago
        The SEC has done nothing in good faith with regards to crypto in the last 8 years.
    - delfinom 3y ago
      >The burden is on SEC to prove these allegations. If they took YOU to court, calling YOU a thief, you would expect the burden to be on them, right? WELL, the former CEOs of Binance.US who quit after realizing CZ was the real CEO against what was supposed to be the real setup seem to have testified to the SEC...along with hints the SEC has a big pile of private messages.
moralestapia 3y ago
Tomorrow's Levine's Newsletter will be sweet :D Btw, is there a single bitcoin exchange who is operated by people that do not behave like teenagers?
- refulgentis 3y ago
  Try company, ugh. The stuff I've seen at FAANG...
- el_nahual 3y ago
  Bitso out of Mexico/Brazil is about as serious as any company can be IMHO.
  - moralestapia 3y ago
    Sure, that's what everyone said about Zhao when it was SBF's turn to be the bad guy. With re. to Bitso specifically, a couple years ago I reached to them to let them know about a somehow serious vulnerability in their API and their response was pretty much "yeah, whatever". Really.
- artursapek 3y ago
  Kraken
- thebiglebrewski 3y ago
  Does Coinbase count?
- themagician 3y ago
  Bisq. Any centralized crypto exchange will ultimately end up being a scam because there is no reason for centralized exchanges to exist at all. There is no reason for anyone to hold your funds for more than what it necessary to complete a transaction. Because of this, there is really no money to be made.
  - z3c0 3y ago
    It's amazing I don't see Bisq discussed more on HN of all places. It's probably the best example of how cryptocurrency should be traded. Custodial services have always been bad news. Decentralized, capable of anonymity, and with transparent prices. The last bit makes the huge spread of cryptocurrency more obvious, which would go a long way towards helping the casual user understand the volatility.
Animats 3y ago
"The S.E.C. said the world’s largest cryptocurrency exchange mixed “billions of dollars” in customer funds and secretly sent them to a separate company controlled by Binance’s founder, Changpeng Zhao." That's a criminal offense. Here's the court filing.[1] This is just a civil case for now, but expect criminal charges. "Between October 2022 and January 2023, Zhao personally received $62.5 million from one of the Binance bank accounts." The court filing shows the structure of Zhao's companies. The SEC has figured out how Binance works. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
- samsolomon 3y ago
  The map linking companies is on page 12 for those interested.
  - api 3y ago
    That all looks very decentralized.
- janmo 3y ago
  The DOJ probably already has a sealed indictment and is waiting for CZ to visit an extradition friendly country, but I doubt CZ will ever do it.
  - mark_mart 3y ago
    Isn't he already in Canada?
    - whimsicalism 3y ago
      He's in Dubai, haven for rich people who know they are being hunted by the western world, big former hangout for european mafia folks
tibbon 3y ago
One thing I noticed, which always felt possibly-illegal, was how Binance and other exchanges would frequently freeze up funds that didn't meet minimum withdraws. If a coin fell to too-low of a price, they'd essentially just keep them. Sure, it is only $5-100 here and there, but that all adds up. Where does it go? With a real bank or exchange, I'd expect some ability to sweep up my accounts and get a paper check for 50 cents if needed.
- sebzim4500 3y ago
  > it is only $5-100 here and there Does anyone have withdrawal minimum that are close to $100? Most of the Kraken minimums are below $1. It's also not true that can always empty a bank account for free. HSBC wouldn't let me sweep funds out of an account with ~$4.00 in it, for example, since it was international and the transfer fee was larger than that.
- StingyJelly 3y ago
  If I remember correctly you could always exchange those low amounts for their shitcoin, then exchange that for something with reasonable withdrawl fees like monero and withdraw that. (or even withdraw their shitcoin and exchange it elsewhere if it was below their minimum exchange amount)
EMCymatics 3y ago
Good job Gary Gensler. This is extremely important.
swamp40 3y ago
Whistleblowers get a percentage of the fine. They were sabotaged from within. But all the bigwigs are offshore.
deleted 3y ago
[deleted]
Geekette 3y ago
Coincidentally, Rolling Stone just published a profile on the founder: Crypto’s Richest Man Is Waiting Out the Chaos https://www.rollingstone.com/culture/culture-features/changpeng-zhao-cz-crypto-binance-1234740435/ https://www.rollingstone.com/culture/culture-features/changp...
- api 3y ago
  Fawning magazine profiles are a strong contrarian indicator. Time Man of the Year is basically like making a guy king for a day before putting him inside the wicker man and lighting it on fire.
Animats 3y ago
Read the court filing. There's a lot of inside information from "BAM CEO A" and "BAM CEO B". These were the first two CEOs of Binance.us. They came on board thinking they had a real job. Then they discovered they were just figureheads. "BAM CEO A" was fired. "BAM CEO B" quit after three months and started cooperating with US regulators. "Upon assuming his CEO duties, however, BAM CEO B quickly learned that Binance, in fact, exerted and would not relinquish substantial control over BAM Trading and the operation of the Binance.US Platform. As he testified under oath, BAM CEO B did not “have any firsthand knowledge of exactly what [Binance] entity managed [Binance.US Platform’s] servers,” but he knew it “wasn’t [BAM Trading].” Similarly, he also testified that the matching engine was “presumably owned and administered by some [Binance] entity, but I have no idea which one, and then there’s other servers doing other functions.” He concluded, the “biggest risk in this company is we are highly dependent on a bunch of technology that sits in Asia.” "BAM CEO B tried to implement plans to migrate those functions and control of the crypto assets from Binance to BAM Trading and into the United States, but Zhao quickly overruled him, causing BAM CEO B to resign approximately three months into his tenure." "As BAM CEO B testified, “[W]hat became clear to me at a certain point was CZ was the CEO of BAM Trading, not me.” He further explained that he spent his first 80 days as CEO trying “to get these core foundational things realigned,” but “was overruled on all of them” by Zhao. BAM CEO B elaborated, “All of the things that we had previously agreed and had worked on for 80 days were suddenly repudiated with no further discussion, and on that day, I realized, huh, I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left.”"
- csunbird 3y ago
  Very interesting… I guess the CEO’s were hired to be thrown under the bus when it is the time. Their job was to PLEASE: Provide legal exculpation and sign everything. (hey HIMYM fans!)
  - bornfreddy 3y ago
    > I guess the CEO’s were hired to be thrown under the bus when it is the time. It's ironic that they are now the ones feeding SEC with inside information. It seems like the plan backfired?
kumarski 3y ago
Earlier today, I talked to people who are reformed criminals who have been thrown in Jail by the SEC and know its inner workings fairly well. He'll likely get a slap on the wrist with some fines. Doesn't look like anybody is going to jail. We shall see how things shake out. Would get intriguing if the jaws of FINCEN suddenly opened up.
- unicornmama 3y ago
  The SEC brings civil charges, it doesn't "throw people in jail"
- ourmandave 3y ago
  The SEC doesn't jail people. That's the DOJ that brings criminal charges, like with Sam Bankman-Fraud.
gymbeaux 3y ago
The same thing will happen to Coinbase. Just look at the backgrounds of their CXOs. None are qualified to be leading such a large company IMO. I bet my life the same shit is going on over there.
- EddieEngineers 3y ago
  Coinbase is a public company and has genuine audits - I'd be surprised if they failed for any reason other than Crypto being outlawed.
  - givemeethekeys 3y ago
    > has genuine audits Trouble with auditors is that they're paid for by the company. You try hard not to bite the hand that feeds you.
    - EddieEngineers 3y ago
      Sure, but as a public company they're legally responsible for the audit they signed off and while the Big 4 refuse to work with private crypto companies, Deloitte did choose to audit Coinbase. I just don't believe they can get away with this level of shady stuff while a Big 4 audit them and they're under extreme scrutiny for the sector from the SEC.
      - gymbeaux 3y ago
        Before it was the "Big Four" it was the "Big Five". Look into what happened to that fifth one... (Arthur Andersen re:Enron) It's worth noting that while we got the Sarbanes-Oxley Act out of it, it was more or less replaced by Dodd-Frank Act, which was partially repealed by Trump in 2018.
  - wmf 3y ago
    Audits only show that Coinbase isn't stealing. They don't look for unregistered securities trading.
  - 3y ago
themagician 3y ago
Are we days or hours away from finding out Binance is insolvent? Anyway, it was obvious to everyone that Binance was a scam from the beginning. Anyone with a brain knows to use a quality exchange like <INSERT NEXT FAILED CRYPTO EXCHANGE HERE>.
- EddieEngineers 3y ago
  Coinbase?
  - rc_kas 3y ago
    Coinbase always seemed close to the only honest player in the game. They did it at a cost of always being behind the market in listings and offerings.
    - EddieEngineers 3y ago
      Looks like coinbase is on the chopping block now (:
    - themagician 3y ago
      Aged like milk.
      - EddieEngineers 3y ago
        Yeah haha, whoops
EddieEngineers 3y ago
Surprised CZ owns 100% of CryptoMarketCap - that seems ripe for manipulation.
- ceejayoz 3y ago
  That should make it unsurprising.
- CamelCaseName 3y ago
  Did you mean coinmarketcap?
  - EddieEngineers 3y ago
    Sorry you're right I did, had crypto in my head when I wrote that
pidgin123 3y ago
Isn't this exactly how all US entities in China operate?
quyleanh 3y ago
Why there is no such kind of suing happened during FTX? And does people trust SEC more than Binance?

593 points by kgwgk 3y ago

smart_jackal 3y ago

[flagged]

Octoth0rpe 3y ago
I don't doubt that quite a few politicians were being all warm and fuzzy with various FTX people pre-collapse, but SBF is currently awaiting a long list of expected charges and I don't think anyone doubts that he's headed for jail (excluding some dramatic escape funded by hidden monies). Justice may not have been served, but it's most definitely in progress. Biden's SEC seems to be doing its job in both cases and without prejudice, albeit belatedly.
JumpCrisscross 3y ago
> Biden's SEC is doing it merely because of his South Asian origin Zhao is a “Chinese-born Canadian” [1]. Not South Asian [2]. [1] https://en.m.wikipedia.org/wiki/Changpeng_Zhao https://en.m.wikipedia.org/wiki/Changpeng_Zhao [2] https://en.m.wikipedia.org/wiki/South_Asia https://en.m.wikipedia.org/wiki/South_Asia
deleted 3y ago
[deleted]
jaywalk 3y ago
Come on. I'm no fan of Biden, but your comment doesn't even make sense. SBF is going to jail.
- SamReidHughes 3y ago
  That was after the company collapsed.
  - mrguyorama 3y ago
    Yes and everyone thought Enron was the greatest until their fraud was exposed. When you have minimal transparency it's really easy to cook the books and look good. That's like half the point of regulations around public companies.
    - SamReidHughes 3y ago
      That is completely irrelevant.

madars 3y ago

Archive: https://archive.is/e1x4l https://archive.is/e1x4l

hiq 3y ago
Updated: https://archive.ph/WEoa2 https://archive.ph/WEoa2

bmc7505 3y ago

Isn't CZ already being sued by the CFTC? Is cryptocurrency a security or a commodity and under whose jurisdiction does Binance fall? Or were they trading in both types of instruments? https://news.ycombinator.com/item?id=35327996 https://news.ycombinator.com/item?id=35327996

JumpCrisscross 3y ago
> Is cryptocurrency a security or a commodity The SEC complaint sidesteps what Bitcoin or Ethereum are by focussing on other transactions, e.g. the ICO and trading of BNB and the private placements of its own stock.
wmf 3y ago
Some cryptocurrencies are commodities and some are securities. Binance was trading both kinds so they get spanked twice.

LatteLazy 3y ago

Still no sign of workable regulations? Better get on an sue everyone for not following rules that don't exist yet...

JumpCrisscross 3y ago
> rules that don't exist yet The CFTC complaint shows Zhao et al were perfectly cognisant they were breaking the rules [1]. [1] https://www.bloomberg.com/opinion/articles/2023-03-27/the-cftc-comes-for-binance https://www.bloomberg.com/opinion/articles/2023-03-27/the-cf...
inthewoods 3y ago
Binance, Coinbase, et al: "We'd like new rules from the SEC/CFTC to let us crime." SEC: "No." Binance et al: "You're stopping innovation!" SEC: "You're going to jail."

anonu 3y ago

And BTCUSD down sharply on the news... The crypto winter will be a long one. Link is broken. Here's the SEC press release: https://www.sec.gov/news/press-release/2023-101 https://www.sec.gov/news/press-release/2023-101 And the full 136 page complaint: https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...

boring_twenties 3y ago
It's down ~2.5% to a level last seen ... a week ago. That is not "sharply" by any stretch of the imagination.
- anonu 3y ago
  "Sharply" is anchored on where the price was just before announcement. Not where it was a week ago... Price moved on the news...
  - boring_twenties 3y ago
    The price regularly moves more than 2.5% on no news at all. This move isn't sharp, it's negligible.
  - EscapeFromNY 3y ago
    For anyone coming across this later, here's what happened a day after BTCUSD moved "down sharply": https://i.imgur.com/GSFU7Mu.png https://i.imgur.com/GSFU7Mu.png Just your average market fluctuation, or at worst an overreaction and immediate correction. It's best not to try to predict long term market cycles from the 1h candles.
- deleted 3y ago
  [deleted]
monero-xmr 3y ago
This is good for bitcoin. CZ, Justin Sun, and all the scammers need to be in prison.

tibbydudeza 3y ago

I presume he is not based or living in the US ???

JumpCrisscross 3y ago
> presume he is not based or living in the US Zhao “unlawfully solicited U.S. investors to buy, sell, and trade crypto asset securities through unregistered trading platforms” while “raising approximately $200 million from private investors” and “direct[ing] Binance to assist certain high-value U.S. customers in circumventing…controls and to do so surreptitiously” [1]. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
- rkagerer 3y ago
  If he's outside the US and the country he is in had an extradition treaty with the US, but has no comparable law in the books, wouldn't that impede extradition?
  - JumpCrisscross 3y ago
    > wouldn't that impede extradition This is a civil complaint. Nobody is demanding extradition as no crimes are alleged. If Zhao is dumb enough to blow off the courts, the DoJ will get involved.
    - c2h5oh 3y ago
      This is a civil complaint, but it describes things that can be criminal, e.g: a failure to do KYC required to block transactions with sanctioned people/entities - that can very much be criminal with a max of 20 years iirc.
      - JumpCrisscross 3y ago
        > it describes things that can be criminal There is probably a case, but I don’t see anything that would make Zhao a priority for the DoJ. Maybe that will surface as he responds (or refuses to).

colesantiago 3y ago

This is brilliant. I really want crypto to fade away out of existence and into irrelevance, FedNow is coming soon and we don't need crypto or shady crypto exchanges like Binance. Glad to see the US taking action.

zarzavat 3y ago
95% of people don’t have a bank account in the US.
- misnome 3y ago
  100% of people don’t have a venusian bank account in the US
  - lern_too_spel 3y ago
    That sentence is not saying the same thing. The equivalent would be 100% of people don't have a bank account on Venus.
- deleted 3y ago
  [deleted]
- dgfitz 3y ago
  and 77.34% of statistics are made up on the spot. https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-banking-and-credit.htm https://www.federalreserve.gov/publications/2019-economic-we... 6%
  - JumpCrisscross 3y ago
    Parsed generously, 94% of Americans is about 300mm people. That's 4% of the human population. (It's a nonsense argument nonetheless: it's not America's job to bank the world.)
    - dgfitz 3y ago

ftxbro 3y ago

[flagged]

fallingknife 3y ago

I can't see this enforcement spree by the SEC as anything other than malicious when Gensler himself said that 3/4ths of the market is not securities in 2018. https://twitter.com/ZK_shark/status/1650689125580668931 https://twitter.com/ZK_shark/status/1650689125580668931 Yes this was before he was head of the SEC, but the fact that this was going on right out in the open for 10 years and the SEC took exactly no action tells me that the entire agency shared this opinion too. It doesn't take a decade to shut down an unregistered securities exchange.

JumpCrisscross 3y ago
> this was going on right out in the open for 10 years and the SEC took exactly no action Ripple was sued in 2020 [1]. That’s two years from Gensler’s 2018 statement and 1 year preceding his becoming chair of the SEC [2]. Note, too, that when Gensler made those statements he was the former chair of the CFTC. And nobody is being charged for cash trading Bitcoin or Ethereum. [1] https://www.sec.gov/news/press-release/2020-338 https://www.sec.gov/news/press-release/2020-338 [2] https://www.sec.gov/about/commissioners/gary-gensler https://www.sec.gov/about/commissioners/gary-gensler
misnome 3y ago
Ah yes, the “offhand comment by someone years before they took a position indemnifies you business for all behaviour infinitely into the future no backsies” law
- fallingknife 3y ago
  If by "offhand" you mean the former head of the CFTC giving a lecture in the class he teaches on the subject at MIT while at the same time the SEC is also not taking any actions against crypto exchanges. There isn't a "no backsies" rule, but then you will have to tell me what changed about crypto between 2018 and now that made it pass the Howey test then and fail it now if you want me to believe that the government is acting in good faith.
  - misnome 3y ago

kalupa 3y ago

dupe https://news.ycombinator.com/item?id=36197712 https://news.ycombinator.com/item?id=36197712

misnome 3y ago

Finally some regulatory clarity

sebzim4500 3y ago
Not really, the only assets they have identified as securities here and the ones that were immediately obvious as securities (BNB etc.). They have made no statement regarding BTC, ETH, etc.
- webXL 3y ago
  Gensler explicitly stated that BTC was a commodity about a year ago: https://www.benzinga.com/markets/cryptocurrency/22/06/27866983/commodity-or-security-new-bitcoin-insights-from-sec-chairman-gary-gensler https://www.benzinga.com/markets/cryptocurrency/22/06/278669...
  - deleted 3y ago
    [deleted]
  - deleted 3y ago
    [deleted]
  - whimsicalism 3y ago
    What a ridiculous statement, ethereum at minimum is a commodity. I think it is also absurd to suggest Dai is a security

linusg789 3y ago

Correct original link: https://www.bloomberg.com/news/articles/2023-06-05/sec-sues-binance-and-ceo-zhao-for-breaking-us-securities-rules#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-06-05/sec-sues-... Archive: https://ghostarchive.org/archive/TiwuL https://ghostarchive.org/archive/TiwuL

kgwgk 3y ago
In what sense is the link submitted incorrect?
- misnome 3y ago
  There was a second thread, since merged, where the link was moved so 404’d
  - kgwgk 3y ago
    Thanks! I missed that - and I thought that maybe removing the #blahblah at the end of the URL had some effect I was not aware of.

deleted 3y ago

[deleted]

gadnuk 3y ago

> In one instance, the Binance chief compliance officer messaged a colleague that, “[w]e are operating as a fking unlicensed securities exchange in the USA bro.” Source: https://twitter.com/JohnReedStark/status/1665748594421297152 https://twitter.com/JohnReedStark/status/1665748594421297152 This is a legendary quote from the filing.

jeroenhd 3y ago
I get why you would say something like that in astonishment. By why would you ever send that out over a medium that'll leave a paper trail? Thank goodness that criminals aren't very smart. Their idiocy is doing society a huge favor.
- mytailorisrich 3y ago
  It's a global phenomenon. People can't abstain from posting online and from sharing on messaging platforms these days. It's even been noticed by contemporary philosophers: https://youtube.com/shorts/Blw2dNZwZzg?feature=share https://youtube.com/shorts/Blw2dNZwZzg?feature=share
  - hef19898 3y ago
    Just imagine the paper trail this new breed of criminals will leave!
- tedivm 3y ago
  Oh that's easy- this was the compliance officer, and by showing that he raised concerns over this he may be able to claim that he did his job as best he could under the circumstances. I'd need to see the rest of the context, but this could very well be a "cover your ass" message. Imagine if you're a security officer at a company and were just overridden on a decisions- you'd definitely want to shoot off an email describing the issue so that later on you aren't held responsible for it (of course depending on the severity quitting may also be desirable, but not everyone is in a position to immediately drop a job).

deleted 3y ago

[deleted]

napierzaza 3y ago
[dead]

legitster 3y ago

Is there any indication that eventually Bitcoin and Ethereum don't eventually get pulled into the "unlicensed security" category?

HWR_14 3y ago
I believe there is some indication that the SEC allowed only those two to fall into commodities instead of securities. And that decision may be hard to undo.
GenerWork 3y ago
My understanding may be off, but I believe that Bitcoin will be able to avoid it but Ethereum may have a harder time due to the fact that contracts are pretty much baked into ETH at a basic protocol level. I'm sure if I'm wrong someone will correct me.
- anonporridge 3y ago
  Ethereum will have a harder time because they launched it with an ICO, sought out investors, and the Ethereum foundation explicitly allocated themselves a share of the initial coins. AND now after the migration to proof of stake, ownership of Ether effectively gives you voting rights and administrative control of the network, not unlike a security. Bitcoin was open and permissionless day one for anyone to mine, and Satoshi gave themselves no artificial privileges. The genesis block reward was unspendable. In practice, Satoshi ended up with a huge pile of the coins, but there was nothing that could have prevented the unavoidable obscurity and lack of awareness of such a novel and unproven project. Ownership of coins also doesn't convey any direct administrative privileges in the network. And of course, initially the coins weren't worth anything. There aren't any reasonable arguments that bitcoin is a security, while there are reasonable arguments that ethereum is.
simple-thoughts 3y ago
Gensler is a Bitcoin maxi. He tried to walk back the previous head’s statements on ethereum but unfortunately for him it cannot be done easily. However he will do his best to ban all other crypto.

asciii 3y ago

Even though Binance dropped out of the Voyager deal, they still send out recurring email to complete the setup. Not super shady at all Zhao

thepasswordis 3y ago

[flagged]

sneak 3y ago
The victims are the large established taxpaying vendors of retail luxury goods that people with disposable income are not squandering their money at (because they squandered it gambling on cryptocurrencies). There is a list of ways the state will allow you to waste your money. Most of the allowed ones involve taxation. Most of the prohibited ones do not.
lijok 3y ago
The victim is the tech illiterate grandmother who got sold fake money by an expensive ad, financed by cryptobros who swear up and down they're invested because it's real currency, and not so they can make a profit by indirectly scamming the tech illiterate grandmother
yxhuvud 3y ago
> we’ve gotten to the point of It has been the case at least as long as there has been structured governments around.

mgamache 3y ago

Operation Choke Point 2.0 Continues https://cointelegraph.com/news/nothing-is-a-coincidence-with-the-government-claims-us-lawmaker-on-operation-choke-point-2-0 https://cointelegraph.com/news/nothing-is-a-coincidence-with...

JumpCrisscross 3y ago
> Operation Choke Point 2.0 Continues Would a web3 proponent getting a traffic ticket also count? We have documented evidence of clear, willful violation of the law. And nobody is seriously mooting a CBDC anymore. (Given Silvergate was (a) downed by FTX and (b) the proximate cause of our recent banking meltdown, it is reasonable to argue Chokepoint 1.0 didn't go far enough. But that's irrelevant to this thread.)
lottin 3y ago
For the financial system dealing with cryptocurrencies isn't worth the risk. The banks would have to perform all sorts of AML/CFT checks on every penny that has come into contact with an exchange, and they just don't have the resources to do that.
smoovb 3y ago
Here is the fuller playbook of Chokepoint 2.0 from Cooper Kirk: https://www.cooperkirk.com/wp-content/uploads/2023/03/Operation-Choke-Point-2.0.pdf https://www.cooperkirk.com/wp-content/uploads/2023/03/Operat...

I_am_tiberius 3y ago

Not a Binance fan but in this context, and considering the SECs unwillingness of declaring when cryptocurrencies are securities or not, it's pretty clear that they go after Binance for strategic reasons. Not sure but I assume this is controlled by the Biden admin.

2OEH8eoCRo0 3y ago
Isn't that one of the benefits of a lawsuit? The law is tested and needs to hold up under scrutiny.
- I_am_tiberius 3y ago
  Definitely not when the party who is suing you is the one that defines the rules. Thinking about the scenario of this lawsuit makes me really angry. It's some sort of power demonstration backed by a political strategy.
  - 2OEH8eoCRo0 3y ago
    So they can argue in front of an independent 3rd party called a court.
  - jeremyjh 3y ago
    They are alleging the exchange comingled customer funds and transferred them to another company controlled by Zhao. Why doesn’t that make you angry?
    - I_am_tiberius 3y ago
      That makes me angry as well. It also makes me angry that my bank does something like this with the money I deposit. I doubt this is the pivotal point for that case though.
      - jeremyjh 3y ago
        It’s illegal to do this in a brokerage account, and FTX is an example of why. There is no legitimate reason to do it.

alphanullmeric 3y ago

[flagged]

whateveracct 3y ago
Point one just sounds like your opinion that securities regulations should not exist. Seems like a little stump-box-y to post in a thread about high-profile, blatant securities law criminality lol.
- alphanullmeric 3y ago
  [flagged]
  - lern_too_spel 3y ago
    It should be possible for non-consenting individuals to claw back their money when needed, by rules agreed to by the society they live in. Agree or disagree? More than one word, please. A full explanation is required to justify allowing DPRK and Russia to fund themselves by stealing from crypto-fools and innocent bystanders around the world.
    - z3c0 3y ago
      Can you make the same argument without invoking international bogeymen? This is basically one of the aforementioned Patriot Act talking points.
      - lern_too_spel 3y ago
        I already did. DPRK and Russia aren't imaginary. https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-russia-ransomware-money-laundering/ https://blog.chainalysis.com/reports/2022-crypto-crime-repor... https://www.nytimes.com/2022/06/30/business/north-korea-crypto-hack.html https://www.nytimes.com/2022/06/30/business/north-korea-cryp...

wslh 3y ago

I remember the last post from Fred Wilson: "The Freedom To Innovate" [1]. Even if the SEC is right about Binance and others, and there are without doubt blatant and huge frauds in Web3, there are huge problems with the financial modernization within the US (and the world). Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina. The SEC is not showing a neutral point of view and any special concerns with innovation and legacy system frauds. It doesn't matter if it is call Web3, blockchain, or whatever buzzword you like, banks have real power and a clash is inevitable now or in the near future. It took a century to dethrone Bell System [2]. It is a political and economical issue, not just an industry. [1] https://news.ycombinator.com/item?id=36199584 https://news.ycombinator.com/item?id=36199584 [2] https://en.wikipedia.org/wiki/Bell_System https://en.wikipedia.org/wiki/Bell_System

mikem170 3y ago
> The Freedom To Innovate I'm not sure that innovation in finance has always been a good thing. Over the last 50 years we've seen increased levels of debt, increased college costs, increased housing prices, a bigger and more powerful rentier class, growing income inequality, leveraged buyouts, big business eliminating small businesses, hedge funds buying housing and hospitals, big tech buying up the competition, profit is the name of the game, all of these rich people buying politicians, etc. Who came out ahead after all this? Much of the applied innovation in crypto hasn't been good, either. Block chain is an amazing technology, but the innovators in this space didn't stop at a decentralized money transfer system, they wanted to get rich and they scammed people. So what kind of innovation are we talking about? Who would be helped? > Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina A small aside on this topic: I assume/hope that the new FedNow payment system coming online in a month or so will help with transfers like this.
- wslh 3y ago
  We don't know if innovation, in general, is a bad or good thing. We assume it is generally a really great thing. Innovation requires time, fifty years is nothing to conclude that the financial system should exist in the same way as existed before.

LatteLazy 3y ago

The SEC and CFTC missed FTX being the worlds largest fraud. Now they are desperately going after Binance for... being above board but not getting the right license, during a period when no licenses were offered (and still aren't). At what point is this just pointless bullshit, let exchanges register, regulate them like other exchanges (segregated funds etc) and fuck off already.

tornato7 3y ago
How do we know that Binance is "above board" when they have never published a GAAP audit and their auditors have taken down their "proof of reserves"?
shkkmo 3y ago
> being above board SEC has alleged multiple efforts to lie and deceive both regulators and users. It's hard to see how that qualifies as "above board".
- codehalo 3y ago
  The burden is on SEC to prove these allegations. If they took YOU to court, calling YOU a thief, you would expect the burden to be on them, right?
  - shkkmo 3y ago
    Yes of course. That is why I used the word "alleged". My point stands, the SEC is not going after Binance just for "being above board but not getting the right license".
    - codehalo 3y ago
      The SEC has done nothing in good faith with regards to crypto in the last 8 years.
  - delfinom 3y ago
    >The burden is on SEC to prove these allegations. If they took YOU to court, calling YOU a thief, you would expect the burden to be on them, right? WELL, the former CEOs of Binance.US who quit after realizing CZ was the real CEO against what was supposed to be the real setup seem to have testified to the SEC...along with hints the SEC has a big pile of private messages.

moralestapia 3y ago

Tomorrow's Levine's Newsletter will be sweet :D Btw, is there a single bitcoin exchange who is operated by people that do not behave like teenagers?

refulgentis 3y ago
Try company, ugh. The stuff I've seen at FAANG...
el_nahual 3y ago
Bitso out of Mexico/Brazil is about as serious as any company can be IMHO.
- moralestapia 3y ago
  Sure, that's what everyone said about Zhao when it was SBF's turn to be the bad guy. With re. to Bitso specifically, a couple years ago I reached to them to let them know about a somehow serious vulnerability in their API and their response was pretty much "yeah, whatever". Really.
artursapek 3y ago
Kraken
thebiglebrewski 3y ago
Does Coinbase count?
themagician 3y ago
Bisq. Any centralized crypto exchange will ultimately end up being a scam because there is no reason for centralized exchanges to exist at all. There is no reason for anyone to hold your funds for more than what it necessary to complete a transaction. Because of this, there is really no money to be made.
- z3c0 3y ago
  It's amazing I don't see Bisq discussed more on HN of all places. It's probably the best example of how cryptocurrency should be traded. Custodial services have always been bad news. Decentralized, capable of anonymity, and with transparent prices. The last bit makes the huge spread of cryptocurrency more obvious, which would go a long way towards helping the casual user understand the volatility.

Animats 3y ago

"The S.E.C. said the world’s largest cryptocurrency exchange mixed “billions of dollars” in customer funds and secretly sent them to a separate company controlled by Binance’s founder, Changpeng Zhao." That's a criminal offense. Here's the court filing.[1] This is just a civil case for now, but expect criminal charges. "Between October 2022 and January 2023, Zhao personally received $62.5 million from one of the Binance bank accounts." The court filing shows the structure of Zhao's companies. The SEC has figured out how Binance works. [1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf https://www.sec.gov/files/litigation/complaints/2023/comp-pr...

samsolomon 3y ago
The map linking companies is on page 12 for those interested.
- api 3y ago
  That all looks very decentralized.
janmo 3y ago
The DOJ probably already has a sealed indictment and is waiting for CZ to visit an extradition friendly country, but I doubt CZ will ever do it.
- mark_mart 3y ago
  Isn't he already in Canada?
  - whimsicalism 3y ago
    He's in Dubai, haven for rich people who know they are being hunted by the western world, big former hangout for european mafia folks

tibbon 3y ago

One thing I noticed, which always felt possibly-illegal, was how Binance and other exchanges would frequently freeze up funds that didn't meet minimum withdraws. If a coin fell to too-low of a price, they'd essentially just keep them. Sure, it is only $5-100 here and there, but that all adds up. Where does it go? With a real bank or exchange, I'd expect some ability to sweep up my accounts and get a paper check for 50 cents if needed.

sebzim4500 3y ago
> it is only $5-100 here and there Does anyone have withdrawal minimum that are close to $100? Most of the Kraken minimums are below $1. It's also not true that can always empty a bank account for free. HSBC wouldn't let me sweep funds out of an account with ~$4.00 in it, for example, since it was international and the transfer fee was larger than that.
StingyJelly 3y ago
If I remember correctly you could always exchange those low amounts for their shitcoin, then exchange that for something with reasonable withdrawl fees like monero and withdraw that. (or even withdraw their shitcoin and exchange it elsewhere if it was below their minimum exchange amount)

EMCymatics 3y ago

Good job Gary Gensler. This is extremely important.

swamp40 3y ago

Whistleblowers get a percentage of the fine. They were sabotaged from within. But all the bigwigs are offshore.

deleted 3y ago

[deleted]

Geekette 3y ago

Coincidentally, Rolling Stone just published a profile on the founder: Crypto’s Richest Man Is Waiting Out the Chaos https://www.rollingstone.com/culture/culture-features/changpeng-zhao-cz-crypto-binance-1234740435/ https://www.rollingstone.com/culture/culture-features/changp...

api 3y ago
Fawning magazine profiles are a strong contrarian indicator. Time Man of the Year is basically like making a guy king for a day before putting him inside the wicker man and lighting it on fire.

Animats 3y ago

Read the court filing. There's a lot of inside information from "BAM CEO A" and "BAM CEO B". These were the first two CEOs of Binance.us. They came on board thinking they had a real job. Then they discovered they were just figureheads. "BAM CEO A" was fired. "BAM CEO B" quit after three months and started cooperating with US regulators. "Upon assuming his CEO duties, however, BAM CEO B quickly learned that Binance, in fact, exerted and would not relinquish substantial control over BAM Trading and the operation of the Binance.US Platform. As he testified under oath, BAM CEO B did not “have any firsthand knowledge of exactly what [Binance] entity managed [Binance.US Platform’s] servers,” but he knew it “wasn’t [BAM Trading].” Similarly, he also testified that the matching engine was “presumably owned and administered by some [Binance] entity, but I have no idea which one, and then there’s other servers doing other functions.” He concluded, the “biggest risk in this company is we are highly dependent on a bunch of technology that sits in Asia.” "BAM CEO B tried to implement plans to migrate those functions and control of the crypto assets from Binance to BAM Trading and into the United States, but Zhao quickly overruled him, causing BAM CEO B to resign approximately three months into his tenure." "As BAM CEO B testified, “[W]hat became clear to me at a certain point was CZ was the CEO of BAM Trading, not me.” He further explained that he spent his first 80 days as CEO trying “to get these core foundational things realigned,” but “was overruled on all of them” by Zhao. BAM CEO B elaborated, “All of the things that we had previously agreed and had worked on for 80 days were suddenly repudiated with no further discussion, and on that day, I realized, huh, I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left.”"

csunbird 3y ago
Very interesting… I guess the CEO’s were hired to be thrown under the bus when it is the time. Their job was to PLEASE: Provide legal exculpation and sign everything. (hey HIMYM fans!)
- bornfreddy 3y ago
  > I guess the CEO’s were hired to be thrown under the bus when it is the time. It's ironic that they are now the ones feeding SEC with inside information. It seems like the plan backfired?

kumarski 3y ago

Earlier today, I talked to people who are reformed criminals who have been thrown in Jail by the SEC and know its inner workings fairly well. He'll likely get a slap on the wrist with some fines. Doesn't look like anybody is going to jail. We shall see how things shake out. Would get intriguing if the jaws of FINCEN suddenly opened up.

unicornmama 3y ago
The SEC brings civil charges, it doesn't "throw people in jail"
ourmandave 3y ago
The SEC doesn't jail people. That's the DOJ that brings criminal charges, like with Sam Bankman-Fraud.

gymbeaux 3y ago

The same thing will happen to Coinbase. Just look at the backgrounds of their CXOs. None are qualified to be leading such a large company IMO. I bet my life the same shit is going on over there.

EddieEngineers 3y ago
Coinbase is a public company and has genuine audits - I'd be surprised if they failed for any reason other than Crypto being outlawed.
- givemeethekeys 3y ago
  > has genuine audits Trouble with auditors is that they're paid for by the company. You try hard not to bite the hand that feeds you.
  - EddieEngineers 3y ago
    Sure, but as a public company they're legally responsible for the audit they signed off and while the Big 4 refuse to work with private crypto companies, Deloitte did choose to audit Coinbase. I just don't believe they can get away with this level of shady stuff while a Big 4 audit them and they're under extreme scrutiny for the sector from the SEC.
    - gymbeaux 3y ago
      Before it was the "Big Four" it was the "Big Five". Look into what happened to that fifth one... (Arthur Andersen re:Enron) It's worth noting that while we got the Sarbanes-Oxley Act out of it, it was more or less replaced by Dodd-Frank Act, which was partially repealed by Trump in 2018.
- wmf 3y ago
  Audits only show that Coinbase isn't stealing. They don't look for unregistered securities trading.
- 3y ago

themagician 3y ago

Are we days or hours away from finding out Binance is insolvent? Anyway, it was obvious to everyone that Binance was a scam from the beginning. Anyone with a brain knows to use a quality exchange like <INSERT NEXT FAILED CRYPTO EXCHANGE HERE>.

EddieEngineers 3y ago
Coinbase?
- rc_kas 3y ago
  Coinbase always seemed close to the only honest player in the game. They did it at a cost of always being behind the market in listings and offerings.
  - EddieEngineers 3y ago
    Looks like coinbase is on the chopping block now (:
  - themagician 3y ago
    Aged like milk.
    - EddieEngineers 3y ago
      Yeah haha, whoops

EddieEngineers 3y ago

Surprised CZ owns 100% of CryptoMarketCap - that seems ripe for manipulation.

ceejayoz 3y ago
That should make it unsurprising.
CamelCaseName 3y ago
Did you mean coinmarketcap?
- EddieEngineers 3y ago
  Sorry you're right I did, had crypto in my head when I wrote that

pidgin123 3y ago

Isn't this exactly how all US entities in China operate?

quyleanh 3y ago

Why there is no such kind of suing happened during FTX? And does people trust SEC more than Binance?