The FTX Meltdown will spill over to Binance

Charges coming in money laundering and sanctions violations

Hey Guys,

Just a short update and it needs to be said.

The fiasco of FTX will lead to stricter regulation all around including Binance. With Binance withdrawals hitting $1.9 bln in 24 hours, data firm says - Binance and Coinbase could both see contagion both in terms of consumer reactions in the space and regulators getting more tough.

Binance, the largest global crypto exchange, has been hit by a raft of regulatory challenges worldwide that only seem to increase. U.S. prosecutors may charge Binance, the largest cryptocurrency exchange, and its top executives with money laundering and sanctions violations, the latest twist in a probe that began in 2018 and gained traction during the FTX collapse that shocked the industry.

If tighter regulations is what CZ wants, that’s what he will get.

Sam on Eight Counts

I don’t really care about SBF, the drama has been pretty standard as far as fraud at this scale goes. Save that he didn’t admit to any wrong-doing. Former FTX CEO Sam Bankman-Fried was denied bail on Tuesday by a magistrate judge in the Bahamas who said the former billionaire is a heightened flight risk. Earlier in the day, federal prosecutors in New York City unsealed a federal indictment charging Bankman-Fried with eight criminal counts, including wire and securities fraud, money laundering and conspiracy to defraud the U.S. Bankman-Fried was arrested in the Bahamas on Monday and is expected to be extradited to the U.S.

The FTX debacle, however, created at least one winner: Changpeng Zhao and his Binance group, the largest cryptocurrency exchange. However Binance has been incredibly evasive with global authorities since its rise to power. We have to consider the possibility that China is really behind CZ and Binance, and not some startup success story like we have been told.

If I was China banning crypto I would have developed Binance as a kind of back door into the crypto world. There’s no reason to suppose that’s not how Binance operates today as the world’s largest cryptocurrency trading platform.

Founder Changpeng "CZ" Zhao is among executives who may be targeted, Reuters reported, citing people familiar with the matter. Department of Justice officials are split, however, about whether to proceed, and some want more time to review evidence. CZ is actually responsible for the downfall of SBF, who is himself responsible for the downfall of many others. Competition in the crypto bro culture is not always fair.

Coinbase, Debt and Bonds

Coinbase’s financial woes should continue into 2023, as teh crypto winter continues and potentially spirals to new lows. Coinbase bonds, which have been on a steady decline this year, took a big hit last month after FTX’s collapse sent the crypto industry into a panic.

Coinbase has $3.4 billion in long-term debt, with bonds that start maturing in 2026.

The company’s cash position has dwindled from $7.1 billion at the start of the year to around $5 billion at the end of the third quarter.

We might be witnessing the last era of centralized exchanges in crypto and a big hit on mainstream adoption of cryptocurrencies, even without a major Bitcoin price drop that we should have seen in the FTX meltdown. Bitcoin’s price shows no signs of a rebound just a steady decrease the longer the crypto winter continues.

Binance’s Legal Regulatory Woes By Country

Binance has for a crypto empire been incredibly much like a bad actor skirting regulations globally as evidenced by its many issues internationally.

The U.S.

• Regulators at the Commodity Futures Trading Commission are looking at whether Binance engaged in insider trading or market manipulation by "trading on customer orders before executing them", according to Bloomberg. Binance denied any misconduct.

• The Justice Department and the IRS are also reportedly examining Binance's role in money laundering and tax evasion.

The U.K.

• The Financial Conduct Authority said Binance's U.K. affiliate was operating without approval.

Japan

• Japan's financial agency warned the company for operating without permission.

The EU

• Binance in July said it would suspend deposits from the European Union's Single Euro Payments Area network.

Germany

• Binance earlier this year launched stock tokens, a sort of synthetic instrument that gives commission-free exposure to traditional stocks such as Apple and Tesla. The tokens were being offered through CM-Equity AG, an established company that would hold the underlying stocks.
  
  Germany's financial regulator said the tokens would violate European Union securities laws. In July, Binance said it would no longer offer the tokens, though CM-Equity's CEO told the Block that it was a "business decision" and Binance wasn't forced to stop.

Thailand

• Thailand's financial agency in July filed a criminal complaint against Binance, accusing it of operating a digital asset exchange without a license.

South Korea

• South Korean regulators did not publicly come after Binance, but they did warn crypto exchanges to register. Binance shut down Korean language support and Korean-currency trading pairs in August.

Malaysia

• Malaysia's financial regulator took an enforcement action against Binance and ordered it to stop operating in the country. In August, Binance shut down access in the country.

China

• Though Binance has largely moved itself out of Beijing's reach, China's continued tightening of crypto trading rules inevitably affects customers in the country who might try to use the exchange.

Binance is a Crypto Monopoly

According to the Protocol, Binance is the largest global exchange, doing $27 billion in spot exchange volume over 24 hours as of Tuesday, on a down day in the market, making it much larger than rivals such as Coinbase.

With FTX down, and Coinbase in free-fall, Binance is even more powerful today than it was last year.

We have to never forget that Binance was originally founded in China, and remember what that likely means. Originally founded in China, Binance reportedly pulled its employees and any official presence out of the Chinese market in 2017 after China banned ICOs. It is claimed that it’s founder it just a Canadian entrepreneur. More likely is Binance is the Huawei of crypto.

Binance has launched quickly around the world in many countries. Regulators in many of those countries have said Binance is operating without permission. It’s a bit like China setting up secret police stations and this sort of rogue behavior is what leads me to the conclusion that Binance is actually a Chinese State controlled entity.

The company has long said it doesn't have a headquarters, preferring to be a decentralized company, a structure inspired by the headless nature of cryptocurrencies. But its founder is Chinese Canadian and the company was started in China. The official story is that CZ moved to Canada when he was 12 years old and that he just somehow managed to outsmart the rest of the world founding Binance. Not a likely story.

Binance will face its own reckoning with regulations, even as a single tweet by its founder sent FTX into ruins. Everyone will remember that fateful day and the crypto mafia that fight like thugs over criminal money laundering plagued territory.

Binance has had an elaborate plan to avoid U.S. regulation through a U.S. based entity and evasion of "geographical restrictions" through "technical workarounds", which sounds a lot like the Chinese Government modus operandi. That CZ talks about decentralization is ideological pandering of the worst kind. He has a net worth of at least $20 Billion by now, likely a lot more.

Thanks for reading!