After transactions via Zug company: Crypto exchange founder sued
Changpeng Zhao is a central figure in global crypto trading. The US authorities are now taking action against him – what Switzerland and 300 secret accounts have to do with it.
The cryptocurrency Bitcoin has benefited from the financial crisis. Doubts about the traditional banking system caused the currency’s value to rise by 20 percent in March. But on Monday evening, part of the profit fizzled out within a few seconds.
What happened? The US Trade Commission announced that it Complain against the entrepreneur Changpeng Zhao, he is usually simply called CZ, and has filed several of his companies. The most important allegation: you would have carried out commercial transactions and provided services for customers without having the necessary authorization.
Zhao is not just anyone in the cryptocurrency world. He is the founder of the leading cryptocurrency exchange Binance. This makes the 46-year-old Chinese-Canadian businessman one of the most important minds for handling Bitcoin and Co. transactions.
The lawsuit against him is tantamount to a blow to the scene. It is also seen as an attempt to subject cryptocurrency trading to stricter rules. That should be one of the reasons why Bitcoin reacts so strongly to the announcement by the regulator.
Authority chief Rostin Behnam says: “For years Binance knew that the company violated the regulations.” Instead of doing something about it, the exchange only took care of circumventing the regulations. This is so that business can continue undisturbed. For example, by moving the transactions in question out of the US to hide them from the authorities.
Zhao and his companies are now threatened with trading bans, and the authorities also want to demand any trading profits from the controversial deals.
Allegation that Zhao engaged in a secret trade
In a opinion Zhao dismisses the allegations. The trade regulator’s lawsuit is unexpected and disappointing. Because Binance has been working with the authority for over two years.
“Upon initial review, the complaint appears to contain an incomplete list of facts, and we disagree with many of the points made in the complaint,” Zhao writes. Strict rules would apply to him and the staff; its trading platform would therefore not manipulate the market.
The trade regulator, on the other hand, accuses CZ and his company of maintaining a “secret” internal trading department. The company itself would trade in cryptocurrencies via their accounts without disclosing this to the supervisory authority or its own customers. The commercial transactions ran over 300 secret “house accounts”. These are all owned by Zhao or by companies controlled by him.
Trade of the Zug company was not disclosed
One of the two companies named in the 74-page report is based in Switzerland. It is Zuger Sigma Chain AG. According to the US agency, it is “owned directly or indirectly by Zhao.”
And further: “She has engaged in proprietary trading in Binance’s various markets, including that for digital assets.” However, the company’s trading activities have not been disclosed to the US authorities.
When Sigma Chain was founded in 2019, Zhao was entered as Chairman of the Board of Directors in the Zug commercial register, but was deleted shortly afterwards. This is evident from the documents this editorial office present. He deposited the initial capital in the form of 29 bitcoins worth exactly “103,840.01 francs” at the time. Today, one of Zhao’s employees is registered as the company’s president.
Zhao hits back
It wasn’t the only setback for him and his company network on Monday. On the same day, another US agency stopped Binance’s acquisition of troubled crypto bank Voyager. The deal is valued at $1.3 billion.
While Zhao’s statement was longer on his website, he countered on Twitter with a message containing a single number: “4”. He refers to an earlier tweet in which he formulated his resolutions for the year 2023.
The fourth point was then: Ignore fear, uncertainty and doubt as well as fake news and attacks. It is questionable whether it is not dangerous to ignore the attack by the US authorities.
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