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After losing $84 billion, Binance CEO “CZ” advises building “real products that people use”

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Binance, the world’s largest cryptocurrency exchange, is throwing its weight around in capitols around the world and wielding its cash war chest to capture ex-regulators and legislators, as well as critical media outlets.

It’s been a rocky year so far for the crypto-rich. The crash of TerraUSD stablecoin wiped away $270 billion from the market, and Binance CEO Changpeng “CZ” Zhao has watched 88% of his net worth evaporate, from $96 billion to $11.6 billion in just over four months. According to Celebrity Net Worth, CZ can now claim the illustrious title of the person who lost the most money in human history. Meanwhile, CZ’s company is on a hiring spree, seeking lobbyists and government lawyers, according to its job board

#DisruptionBanking has previously covered Binance’s charm campaign in Africa, its attempts at regulatory compliance and lack of vetting employees in the compliance department. 

On April 29, Binance.US, the American arm of the company, co-sponsored an afterparty for the White House Correspondents’ Dinner, where Colombian diplomats, Binance executives, and American reporters rubbed elbows while dancing to Eric Hilton of Thievery Corporation

Forbes Pokes The Bear, Gets Eaten

Earlier this year, Forbes became the latest victim of Binance, transformed from critic to booster by a cool $200 million capital infusion. Forbes had broken the news about Binance’s hair-brained scheme to create a “Tai Chi entity” or front company to funnel profits from the U.S. market back to the mother entity in the Cayman Islands, bypassing U.S. regulatory scrutiny. 

According to an alleged internal PowerPoint presentation, Binance.US was designed to act as a magnet or decoy for regulators, accepting “nominal fines in exchange for enforcement forbearance” to further “insulate Binance from U.S. enforcement.” Binance.US initiated operations to serve American customers in September 2019.  

In response, Binance sued Forbes for defamation, but then, in 2021, Binance dropped the lawsuit, deciding instead to stuff money into Forbes’ mouth. 

CZ said that the media is “an essential element to build widespread consumer understanding and education.” Notice, he didn’t say “inform citizens,” but rather “educate consumers,” which is suggestive that he intends to use Forbes to boost his brand. 

Recent pieces about Binance.US and CZ are mildly critical but definitely lack the donkey kick to the teeth that characterized Forbes’ prior reporting. Nevertheless, CZ insists Forbes will retain editorial independence. 

A Global Charm Offensive

Meanwhile, Binance is taking a victory lap, trotting around the globe and collecting licenses, joint ventures and cooperation deals to expand operations in France, Bahrain, Brazil, Thailand, Kazakhstan, and Dubai of the United Arab Emirates, heralded by CZ as the “Wall Street of Crypto,” where Binance recently moved its HQ. 

Behind the scenes, Binance’s money faucet is always flowing. In France, the company dumped 100 million-euro into the French blockchain ecosystem and hired 250 staff, including Stéphanie Cabossioras, a former deputy general counsel for the French regulator, Autorité des Marchés Financiers. Binance used the same playbook in the UK by hiring Steven McWhirter, a former official with the UK Financial Conduct Authority

Pay for public officials is paltry, compared to the shiny two or threefold salaries offered by crypto firms, which have lured a dozen former US regulators onto the payrolls of Binance, Coinbase, and others. Thusly, Binance creates the appearance of cooperating with regulators, rather than evading oversight, as is more likely the case. 

Cracks in the Crypto Lobby

Meanwhile, bitcoin tycoons have been showering D.C. politicos with digital largesse, buying attack ads and hiring lobbyists. The Trump administration was seemingly kind to the industry, but Biden has offered a chilly reception and threats of unfriendly legislation. 

So, 80-some blockchain companies formed the Blockchain Association, which was supposed to present a united front in Washington, but it didn’t take long for them to break down into hostile factions, forming their own splinter groups. 

First, when Binance.US ponied up the $250,000 membership fee, Coinbase, its closest competitor, angrily bailed on the Association, citing board decisions that seemed “at odds with the association’s mission.” 

In 2022, industry executives have collectively shelled out  $20 million on federal races, mostly pushing GOP candidates, almost as much as Peter Thiel, the new Trumpist kingmaker. Since 2018, $100 million has been blown on lobbyists to influence the issue one way or the other. Over the same period, the number of lobbyists working on digital assets has nearly tripled from 115 to 320.

Not to be outdone, the Securities and Exchange Commission (SEC) announced in May that it plans to double the size of its staff focused on oversight of digital assets, which likely elicited consternation among the bitcoin millionaire crowd. With the recent collapse of TerraUSD, anti-crypto legislators like Sherrod Brown (D-OH) and Elizabeth Warren(D-MA) are licking their lips.

Binance.US bulks up its ranks via the revolving door

Facing various regulatory inquiries about money laundering and tax evasion, Binance has been struggling to hire and retain ample government affairs and compliance staff. In September 2021, the company hired three top Washington lobbyists, Senate Democrat-connected Ivan Zapien, as well as former GOP aides Aaron Cutler and Chase Kroll, of Hogan Lovells, one of the largest law firms in the world. In April, Cutler succeeded Zapien as the head of Hogan Lovells’ Government Relations and Public Affairs.  

The company also hired two IRS-Criminal Investigations special agents, Tigran Gambaryan and Matthew Price, as VP of global intelligence and investigations and senior director of investigations, respectively. Greg Monahan, a former US Treasury Criminal Investigator, joined as a global money laundering reporting officer.

These hires deepened Binance’s bench of former U.S. government officials, which already included Maxwell Baucus, a former 40-year member of the Senate and ambassador to China who once chaired the Senate Committee on Finance.  

At the same time, Binance.US was losing high-profile lawyers it had hired only months before. Brian Brooks, former chief legal officer at Coinbase and acting comptroller of the currency for the Trump administration, as well as Manuel Alvarez, a former commissioner at California’s Department of Financial Protection and Innovation, resigned over an alleged dispute with CZ over the company’s “strategic direction.”

Shortly afterward, more attorneys bailed on Binance.US, including general counsel Christopher Robins, as well as in-house lawyers Katherine Snow and Matthew Sumner. What would cause five elite attorneys to abandon lucrative, senior positions within a matter of weeks? It makes you wonder, but no one wants to talk about it, so one can only speculate that they witnessed something they didn’t like. Hardly reassuring. 

In April, Binance.US ditched the Blockchain Association to create its own lobbying shop. On May 11, Binance announced the hiring of Joshua Eaton, a former deputy U.S. attorney for the Northern District of California, as its first deputy general counsel, saying Eaton will lead legal affairs, global compliance, investigations, and law enforcement coordination activities. 

Then, on May 24, Binance.US announced that Josh Wilsusen, a former securities counsel to Chairman Michael Oxley on the House Financial Services Committee, would join the company as its first Chief Policy Officer, “to elevate Binance.US’ voice by participating in emerging policy debates around digital assets and cryptocurrencies in Washington.”

Binance: Freedom Fighting or Market Domination?

Despite sporadic allegations that Binance suspends trading and withdrawals at inopportune times, Binance remains the largest exchange and is apparently well-regarded by users. According to Forbes’ oddly flattering verdict, Binance.US is the “Best Overall Crypto Exchange,” offering “a rich blend of useful charts and an intuitive user interface,” but “best of all, Binance.US charges rock-bottom fees.” 

Scan Twitter and Reddit threads about Binance and you won’t find any mention of the problem of money laundering. Nobody cares. When CZ announced on April 22 that North Korean hackers attempted to launder stolen funds through Binance, a chorus of fans offered nothing but backslappy praise.

Although anti-corruption and transparency advocates sound the alarm, most crypto enthusiasts seem happy that Binance and its competitors pour more money into potentially manipulating government policy while scooping up more and more former government officials, lobbyists, and attorneys. 

It seems ironic that co-opting government with a traditional industry association and politically connected lobbyists is seen as a worthy cost of doing business, considering that many bitcoin investors are fervent believers in decentralization. 

Questionable Shills for Castles in the Sand

So, let’s review. Digital assets have been billed as an alternative for small investors to build wealth outside the traditional banking system, but the currencies, coins, and exchanges lack transparency and the assets are no longer a hedge against declines in conventional investments.

Meanwhile, crypto and blockchain companies are increasingly hiring venal ex-government officials, many of them rock-ribbed, card-carrying members of the Republican Party.

Some of the highest-profile new advocates shilling for crypto are veterans of the Trump administration which sponsored a multi-pronged coup and terrorist attack on U.S. democracy.

On the Democratic side, the party is split between powerful critics like Senators Warren and Brown and a new generation of progressives like Rep. Josh Gottheimer (D-NJ) and Rep. Ritchie Torres (D-NY) who want to embrace the industry. These companies don’t care about politics; they are just padding the pockets of anybody with power who will let them write the law. It’s the American way!

The issue of freedom and digital assets is not black and white. On one hand, by buying legislators and financing the far-right, the influence of Binance and other exchanges like FTX may be corrosive to democracy in countries like the USA and the UK, while offering an escape from repressive government surveillance and control in countries like Turkey and Kazakhstan.

With a brand new crypto collapse fresh on our minds, rather than buying the dip out of FOMO, we might instead ask ourselves, “What are these companies actually building?” CZ seems to have become reflective, as well, offering his wise musings on Twitter.

CZ might want to take some of his own advice.

Author: Tim Tolka, writer, journalist, and BI researcher

#Crypto #Bitcoin #DigitalAssets #Disruption #CZ #Binance

The Editorial Team at #DisruptionBanking have taken all precautions to ensure that no persons or organisations have been adversely affected or offered any sort of financial advice in this Article. This Article is most definitely not Financial Advice.

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