- It is reported that Changpeng Zhao, the founder and majority owner of Binance.US, is exploring ways to reduce his ownership.
- As Binance faces a CFTC lawsuit, CZ is currently the majority owner of the subsidiary.
- The exchange’s top executives are discussing this decision to side with US regulators.
Changpeng Zhao, founder and majority owner of Binance.US, is exploring ways to reduce his ownership, according to a report by The Information.
According to sources familiar with the situation, Zhao has been trying to sell some of his stock since the second quarter of last year.
CFTC Lawsuit Allegations Trigger Action
The Commodity Futures Trading Commission (CFTC) named CEO Zhao and COO Samuel Lim in a complaint filed in March targeting Binance’s US subsidiary. The CFTC lawsuit alleges several violations and aims to pierce the company’s corporate veil.
The agency said that Binance.US had made significant profits by leveraging important business connections in the country. However, the legal action alleges that the exchange and CZ intentionally violated registration and compliance obligations under US federal laws.
In addition, the CFTC accused Binance, Zhao, and Lim of assisting American customers by ignoring federal laws. They allegedly bypassed Binance’s geographic restrictions by using virtual private networks. The document also implies that Binance hid its ownership and organizational structure through “a maze of corporate entities.”
The commodity regulator accused Binance, its CEO, and former compliance officer of exploiting regulatory arbitrage and being in “intentional evasion.”
According to the report, the exchange’s top executives are discussing whether Zhao’s ownership position should be reduced, which would be done in favor of US regulators. CZ’s role in the CFTC lawsuit worries Binance.US executives. Senior bosses fear that if Zhao remains the main owner, the company may not be able to obtain certain regulatory licenses.
Meanwhile, current and former Binance.US executives are hiring lawyers to fight the CFTC action. Former executive Catherine Coley asked James McDonald of Sullivan & Cromwell to represent her in the CFTC action against Binance.
Binance Criticizes US Regulations
Binance has recently expressed the difficulty of doing business in the US, where it faces increasing legal actions. Patrick Hillmann, the company’s Chief Strategy Officer, told the Financial Times that the US is not clear about its rules. He criticized the government’s pressure on cryptocurrencies, citing what they have done in the past six months.
The executive used Coinbase’s situation, which is being sued by the Securities and Exchange Commission (SEC) for suspected violations of securities laws, to explain the state of the US crypto sector. Meanwhile, Hillmann said they wanted to be regulated in the UK. Binance sees it as a more hospitable place, whereas “the US is currently in this weird place.”
Meanwhile, the latest Exchange Review Report shows that Binance’s company has suffered recently. In April, Binance’s spot trading volume fell by 48.1% to $287 billion, the lowest monthly trading volume since 2021. The research also shows that Binance’s market share has declined for the second consecutive month, reaching its lowest level since October 2022 at 46.3%.
