Changpeng Zhao is Looking to Reduce his Stake in Binance US to Improve the Company’s Image
Changpeng Zhao (CZ), the CEO and co-founder of the world’s largest cryptocurrency company and exchange, Binance, is trying to reduce his stake in the US arm of the exchange in an effort to improve the company’s image in the eyes of regulators.
According to a report by The Information on Thursday, May 11th, two people familiar with the matter said that Chapeng Zhao (CZ) had been trying to sell at least some of his stake since last summer. As the US arm of Binance is under intense scrutiny by US regulators, leadership worries that they might be unable to obtain certain regulatory licenses as long as CZ holds the majority of power.
https://t.co/mcZa7tFqRd explores ways to cut Changpeng Zhao's stake, in hopes of improving the crypto exchange's standing with U.S. regulators, @aidanfitzryan and @erinkwoo report.https://t.co/01pug8XfQj
— The Information (@theinformation) May 11, 2023
CFTC Lawsuit has Intensified the Efforts
Following a tremendous 2022, 2023 has brought many headaches for Binance. The exchange is under many investigations by US regulators. Binance was already bracing itself to settle many US investigations for past policy violations even before they struck with any legal action. The CEO of the exchange CZ has been accused of ties with China and the ruling CCP.
In February, the SEC sued Paxos, the issuer of Binance’s stablecoin BUSD resulting in the end of minting. Furthermore, the regulatory pressure has forced the exchange to cancel the $1.2 billion deal to acquire bankrupt crypto lender Voyager Digital’s assets.
Therefore, CZ is seeking ways to lessen the regulatory pressure by bringing new stakeholders to the company. The recent CFTC lawsuit has intensified those efforts, according to the report.
Blockchain Journal reported that the US Commodity Futures Trading Commission (CFTC) sued Binance group and CZ in March, alleging “willful evasion of federal law and operating an illegal digital asset derivatives exchange.” The commodities regulator has also sued the chief compliant officer (CCO) Samuel Lim for “aiding and abetting Binance’s violations.”
CFTC complaint alleges that both lead executives willfully violated the applicable provisions of the Commodity Exchange Act (CEA) and CFTC regulations while “engaging in a calculated strategy of regulatory arbitrage to their commercial benefit.”
Since the lawsuit, the management at Binance US has been discussing how reducing CZ’s stake in the company might help improve the company’s image on the radar of regulators, where everything crypto has been beeping red since the collapse of FTX.
Moreover, according to the report, leaders of Binance US are worried that they may not be able to acquire certain regulatory licenses as long as CZ remains the majority owner.