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What’s going on with Binance and US regulators?

Photo of: Nathan VDH
by Nathan VDH

A recent article has accused Binance, the world’s largest exchange by transaction volume. It is the “Tai Chi” leak. It claims that Binance has knowingly considered a structure to deceive regulators and take advantage of crypto-investors in the United States.

This is a leak that should not improve the situation of crypto exchanges. After BitMEX and OKEx, it is now turn for the first exchange in volume, Binance, to find itself in the turmoil. The crypto exchange is harshly questioned in an article by Forbes.

“Binance Holdings Limited (…) has devised an elaborate corporate structure designed to intentionally mislead regulators and surreptitiously take advantage of crypto-investors in the United States,” the site states.

It is based on a document, presumably internal to the company, from Binance’s senior management. Called “Tai Chi”, a nod to the Chinese martial art, this leak refers to the creation of an entity of the same name in the United States.

According to this document, dating back to 2018, Binance is planning to abuse the U.S. regulator. If it does have a legally compliant subsidiary in the country, it would be a decoy. A strategic plan included less permissible measures. The ultimate goal would be to transfer the revenues of the U.S. subsidiary to the parent company, Binance.

At the same time, potential clients would be given advice on how to avoid geographic restrictions. This would be accompanied by technological workarounds.

These accusations are strongly disputed by Binance’s CEO, Changpeng Zhao. For example, he assures that the document does not originate from an employee of the exchange. According to Forbes, the author of the document no longer works for the company.

But according to his source, it is indeed a former employee of Binance, Harry Zhou, entrepreneur and co-founder of Koi Trading. This cryptocurrency exchange is headquartered in San Francisco and counts Binance among its shareholders.

But its CEO is more widely disputing the authenticity of the Tai Chi document. “Binance has always operated within the limits of the law,” he says. “We don’t recognize the alleged document,” he said.

In addition, according to the executive, the creation of various exchanges in several countries demonstrates Binance’s commitment to comply with the regulatory framework. The company claims “a very strong collaboration with many notable law enforcement agencies around the world.

As for the production of such a strategic document, it does not reflect the reality of the exchange’s operations. “Anyone can produce a ‘strategy paper’, but that doesn’t mean that Binance is following it,” he concluded on Twitter.