In a chat about certain Binance customers, including some from Russia, Lim said in February 2020: “Like come on. Lim’s colleague replied: “Can barely buy an AK47 with 600 bucks.” The complaint says Lim had received information in February 2019 “regarding Hamas transactions” on Binance and told a colleague that terrorists usually send “small sums”, as “large sums constitute money laundering”. The CFTC claims Binance knew it had facilitated potentially illegal activity, including with the Islamic militant group Hamas. While these are only allegations, of course, they are pretty serious and, if true, put Binance at significant jeopardy.” Warnings about Hamas “If they have an inside person who can contextualise and provide communications, that is even worse for Binance and CZ. “The CFTC allegations are shocking enough on their own,” says Fischer. Howard Fischer, a partner at New York law firm Moses & Singer, says the material could have been handed over to the CFTC by Binance, another government agency could be sharing the evidence with the CFTC or the material could have been provided by a company insider. It is clear from the evidence presented that the CFTC has access to sensitive material, including the content of Zhao’s phone. Running to 74 pages, the complaint is a long read, but worth it for its claims about the highly unconventional way that Binance operates, its attitude to regulation, its customers – whom senior figures allegedly suggested included terrorists – and how its senior operators were apparently willing to put this all down in writing. The “handful of companies” Gensler has touted as having registered as crypto firms include 3 now-defunct companies (including one promoting a weed token) and a crypto lender fined by the SEC.Footballer Cristiano Ronaldo is one of Binance’s commercial partners. “The SEC and CFTC have made conflicting statements, and don't even agree on what is a security and what is a commodity.”įurthermore if the SEC’s central argument in their suits is that Coinbase and Binance failed to register as securities exchanges, then it seems like a bad faith argument given that not a single crypto exchange has been able to register as a global exchange with the SEC. “There is no path to ‘come in and register’," tweeted Coinbase CEO Brian Armstrong following the announcement of the SEC civil suit against Coinbase. If the SEC is both charging alleged bad actors like Binance, and regulation friendly companies like Coinbase, the issue may not be with the companies themselves, but the SEC’s relationship to the broader crypto industry.
The largest evidence in favor of this theory is that SEC also charged Coinbase-a business whose value prop relies largely on being regulatory compliant (to the point of petitioning the SEC for more legal framework).
The theory is that by rolling in on some of the largest crypto exchanges, the SEC can set an example for how they want regulation on crypto to unfold. With regards to the issue of operating as an unlicensed exchange, it gets a bit trickier. However, such theories still lack too much substance to assert anything conclusive about a bias in regulation, as these types of connections are not uncommon among other large financial institutions also regulated by the SEC. Such theories typically point out the large level of donations by FTX founder Samuel Bankman-Fried to the Democrat party, his parents connections to large Democrat fundraisers, and several meetings between Fried and SEC Chairman Gary Gensler. There are those (including Zhao) who have alleged that much of the current regulatory climate can be explained by the administration’s pro-FTX bias, that the SEC now has to cleanup to prevent embarrassment in wake of the highly-public collapse. “Sure, they lost the TRO, but ultimately secured a settlement agreement that stripped away CZ’s influence over Binance.US funds." "The SEC may have had a short-term loss on the TRO, but they may consider it a long-term win for US customer funds,” Hermine Wong, a former SEC regulator and previous Head of Policy at Coinbase, told me in an interview.
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