"The idea that a five-year-old start-up could mature and operate at the same level as a financial institution that has been around for 200 years was once impossible to fathom," the billionaire wrote in January in a review of the previous year.
"But we are nearly there today."
That dream is now looking more distant after the SEC's action.
In the review of 2022, Binance hailed its progress in complying with regulations across the world. The exchange had strived through the year to strengthen client checks, it said, developing crypto's "best security and compliance team." But according to the SEC, Zhao and Binance "consciously chose to evade" U.S. laws "in an effort to maximize their own profits." This "put their customers and investors at risk," the SEC alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022. "Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said. The U.S. Justice Department has been investigating Binance for alleged criminal sanctions violations and money laundering, Reuters reported in December, with some prosecutors believing they have sufficient evidence to charge Zhao and other top executives. Binance said at the time it did not have any insight into the inner workings of the DOJ.
ZHAO 'ANSWERS TO NO ONE' Zhao was born in China before moving to Canada in 1989 when he was 12, two months after China's Tiananmen Square crackdown on pro-democracy protesters, he wrote in a blog last year.
The tycoon, known by his staff and online followers by his initials CZ, has crisscrossed the globe in his quest for success, working in Tokyo and New York before moving to Shanghai, where he embraced crypto and founded Binance in 2017.
Its expansion was dramatic. Binance became the world's biggest crypto exchange within six months, and now accounts for about 60% of global crypto trading volumes, according to research firm CCData. The exchange, however, has repeatedly refused to disclose where its trading platform is located. From the company's earliest days, Zhao kept a tight grip on Binance, as a powerful leader committed to secrecy and focused on market domination, a Reuters report last year found. Zhao installed a tight circle of associates, many of whom had worked or studied in China, into top jobs. Co-founder Yi He now runs Binance's $7.5 billion venture capital arm, as well as other key departments. Zhao tasked his Chinese-born head of back office, Guangying Chen, with managing the company's finances. This included a series of accounts that Binance opened at now-defunct U.S. lender Silvergate Bank, Reuters reported last month. In one of these accounts, held by a trading firm called Merit Peak which is controlled by Zhao, Binance mixed customer funds with corporate revenues and used the monies to buy the exchange's bespoke dollar-linked crypto token, Reuters found. The SEC alleged this too in its complaint. Chen also operated bank accounts belonging to Binance's purportedly independent affiliate Binance.US, ensuring that Zhao could direct the company's expansion in the American crypto market too, Reuters reported on Monday. While Binance has hired widely from the traditional financial and regulatory worlds in recent years, Zhao's tight control over his company has continued. The company, which calls itself an "ecosystem," has set up at least 70 entities, most controlled by Zhao personally. "Zhao answers to no one but himself," the CFTC said in its March complaint. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FACTBOX-Binance, world's top crypto exchange, at center of US investigations FACTBOX-Highlights from SEC complaint against crypto exchange Binance US sues Binance and founder Zhao over 'web of deception' BREAKINGVIEWS-Binance charges are a last gasp for crypto ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Angus Berwick and Tom Wilson in London Editing by Pravin Char and Matthew Lewis)
