Among the mistakes that troubled team members at Binance, situated outside of the United States, were an erroneous Google Forms account and an early trading launch. They were concerned that U.S. regulators might flag excessive influence over its American licensee, Binance.US. A Telegram group chat revealed the Binance team’s concerns over regulatory scrutiny.
The news surfaced less than a month after corporate representatives were said to have talked about making financial concessions in U.S. regulatory proceedings that were still ongoing. Changpeng “CZ” Zhao, the CEO and founder of Binance, was reportedly the subject of a criminal investigation by the Justice Department in December.
The report claimed that up to two years before Gary Gensler became chairman of the Securities and Exchange Commission, many companies sought to enlist Gensler as an adviser. At the same time, he was still a professor at the Massachusetts Institute of Technology. Binance, by far the largest cryptocurrency exchange in the world, was among these organizations.
The Journal referenced a group chat among important members of the Binance team, including Zhao, as well as from corporate documents and interviews with former employees. According to reports, Zhao had meetings with Gensler where he discussed licensing strategies. However, Gensler declined the offer to become an advisor.
A message sent by another employee stated that it was probable for Gensler to return to a regulatory position if Democrats won the 2020 election. Gensler worked on President Joe Biden’s transition team after the election and was subsequently nominated and confirmed by the Senate to lead the SEC in April 2021. Five days later, he was given a five-year tenure that would last until 2026.
Staying out of the regulatory crosshairs of American regulators while pursuing American customers was one of Binance’s main concerns. Reports cited that Binance intended to emphasize that Binance.US—established in 2019 under a Delaware corporation entitled BAM Trading Services Inc.—was only a company that would license Binance’s technology and brand. The internal presentation, “Insulate Binance from US Enforcement,” was mentioned.
With more than 18% of page visits on Binance.com coming from U.S. visitors, it was difficult for Binance to separate its global and American companies. Also, the compliance officer at the company suggested on Telegram that the employees should “be creative and VPN.”
When Binance.US was prepared to onboard new customers, an employee inadvertently created a Google Form using an account for the international company, causing confusion when the team attempted to change the form’s attribution from Binance.com to Binance.US. An employee expressed concern on Telegram that the blunder could be used as evidence of “corporate veil piercing.”
In a second incident, reports stated that an employee of Binance opened trading on Binance.US prematurely, sparking chaos in the group chat. Zhao was ultimately the one to determine where the error occurred: “a guy in Shanghai.”
Catherine Coley, the initial CEO of Binance, was quoted as saying, “we are a very separate entity” and “we are simply licensing software” to the public. Still, she told her team they also reported to Binance executives “CZ/Wei”—Zhao and then-CFO Wei Zhou.
According to reports, a compliance officer at the company posted on Telegram, advising everyone to submit their weekly reports before 7 pm EST/4 pm PST to please Wei. She also requested 2-5 bullet points from each person about their work that CZ/Wei should know.
Binance and Binance.US provided statements to The Journal, with the former acknowledging that Binance.com did not have sufficient compliance and controls during its early years. The company stated that it has since become a different entity in terms of compliance.
The spokesperson for Binance.US stated that their company was established with the aim of providing services and products to customers in compliance with the rules and regulations of the United States.