Our weekly roundup of East Asia news curates the key industry developments.
Binance’s secret US users
On March 27, the US Commodity Futures Trading Commission (CFTC) accused Binance and its founder Changpeng Zhao of alleged willful circumvention of federal laws and operating an illegal digital asset exchange. In the 74-page complaint, the CFTC claimed that despite the exchange’s public position to ban US users, internal documents indicate that at least 20% to 30% of the exchange’s traffic came from US customers. That equates to almost three million alleged US users by mid-2020.
Crypto exchanges must register with either the CFTC or the US Securities and Exchange Commission before soliciting US customers. However, the CFTC alleges that Binance ignored such a ruling, as its executives claimed the regulations are “inappropriate” in the context of Binance’s corporate structure and that it is “more profitable” to simply circumvent them.
Since the allegations surfaced, Chicago-based quantitative trading firm Radix Trading has confirmed that it is one of three high-volume trading firms being onboarded by Binance and named in the CFTC complaint. In an official statement, Binance called the CFTC lawsuit “unexpected and disappointing.”
Founded in 2017 by CZ in China, Binance quickly became the world’s largest crypto exchange thanks to its low-fee trading mechanisms and wide range of products. However, the exchange has also come under intense scrutiny from regulators for allegedly lax know-your-customer and anti-money laundering measures. Among many counts, the CFTC is seeking forfeiture of proceeds from US users’ trading activities, civil fines, and permanent injunctive relief.
Interestingly, a screenshot cited by the CFTC shows that Binance’s largest revenues in 2019 came from the US and China geographic segments, both countries where Binance.com is not allowed to operate.
The US’s unexpected ally in the fight against Binance
From heated diplomatic rows over human rights issues to the South China Sea dispute, the US and China, two major superpowers, often find little in common on day-to-day global affairs. However, it appears that the two have finally found an entity worthy of mutual despise – Binance.
Around the same time that the CFTC unveiled its investigation into millions of allegedly undisclosed US users on Binance, a March 23 report by CNBC found that Binance employees or volunteers allegedly shared techniques for Chinese users to use the Bypass the exchange’s KYC verification.
Techniques shared include using fake residential addresses, VPNs, and non-Chinese email addresses to create an account and then linking it to a Chinese ID card.
Cryptocurrency exchanges have been banned in China since 2017, with its websites blocked and major social platforms banning “Binance” keyword searches.
That same week, a Financial Times investigation claimed that Binance had significant ties to mainland China despite its move in 2017. On the matter, a Binance spokesperson told Cointelegraph that Binance “does not operate in China and we have no technology. including servers or data located in China” and “We firmly reject any claims to the contrary.”
Despite their differences, the US and China have finally found common ground in the fight against Binance. (Magazine via Imgflip)
SBF claimed to have paid $40 million in bribes to Chinese officials
In a new set of indictments against Sam Bankman-Fried (SBF), founder of bankrupt cryptocurrency exchange FTX, by the U.S. District Court’s Southern District of New York, prosecutors alleged that SBF paid $40 million to one or more Chinese government officials to… Unban Accounts related to Hong Kong-based Alameda Research.
In 2021, Chinese authorities allegedly froze $1 billion worth of cryptocurrencies from Alameda Research’s trading accounts on Chinese exchanges as part of an ongoing investigation by a counterparty. Exchanges were banned in China in 2017, but actual enforcement and user offboarding came at a later date.
After months of failed attempts to unblock the accounts, the self-proclaimed effective altruist apparently decided the wheels of justice needed a little grease. Prosecutors say an Alameda employee allegedly transferred $40 million from one of the firm’s accounts to a private wallet in November 2021, on direct instructions from SBF. Shortly thereafter, all Alameda trading accounts were unblocked and SBF quickly returned to its routine trading activities. The criminal trial of the disgraced crypto executive is scheduled for October 2, 2023 and faces up to 115 years in prison if convicted on all charges.
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Rape allegations against Chinese blockchain executives
According to local media reports on March 28, Jun Yu, founding partner of web 3.0 fund A&T Capital and former investment director of cryptocurrency exchange OKX, is currently under criminal investigation by Chinese authorities over allegations of sexual misconduct.
Yu reportedly has Left his role at A&T Capital following the allegations. According to the criminal complaint, the incident began when Yu’s car collided with a vehicle being driven by Ms. Wan, the alleged victim, in Hangzhou, China, at an undetermined time during the year. Fascinated by her “beauty,” Yu then asked Ms. Wan for her WeChat contact to “discuss compensation.”
After that, Yu repeatedly asked to take Ms. Wan to dinner, to which she agreed. Authorities say that during the meeting, Yu allegedly pressured Ms. Wan into drinking excessive alcohol while boasting about his ties to top Chinese Communist Party officials. Later, Yu called a taxi and took the woman to a nearby hotel, where she was allegedly raped.
Shortly after the alleged incident, Yu fled to Singapore, a country that, perhaps unbeknownst to Yu, has an active extradition treaty with mainland China. Hangzhou police reportedly found evidence at the scene, leading to his immediate arrest.
A&T Capital was founded in 2021 and closed a $100 million financing in 2022. The fund has invested in notable crypto projects such as Mysten Labs or Sui Network, Scroll and BitKeep.
The firm has since said it has “zero tolerance” for any illegal or immoral activity and will be conducting its own independent investigation into the incident, in addition to cooperating with law enforcement. Jun Yu previously worked as an investment director at OKX from March 2018 to July 2019.
Jun Yu’s Twitter account with professional descriptions. (twitter)
Zhiyuan sun
Zhiyuan Sun is a Cointelegraph journalist who focuses on technology-related news. He has several years of experience as a writer for major financial media outlets such as The Motley Fool, Nasdaq.com, and Seeking Alpha.