What is happening today at crypto exchangeBinance looks a lot like an earthquake of sorts: the resignation of Changpeng CZ Zhao, the co-founder and current CEO.
Summary
The settlement
Today the US Department of Justice announced a press conference, which has yet to take place, during which it will unveil all the details of the deal.
It all began in late 2022 when the U.S. Department of Justice launched a criminal investigation into Binance. At that time the FTX bankruptcy was still fresh, and it was even feared that Binance might have problems as well.
The exchange actually had no financial problems, but the DoJ suspected that Binance and its CEO Changpeng Zhao may have committed crimes.
During the course of yesterday, rumors began to spread about a possible settlement between the DoJ and Binance, with the exchange appearing to have agreed to pay a fine of more than $4 billion.
More rumors came out today, not yet confirmed but not yet denied either. In a few hours, however, official confirmations should be forthcoming.
CZ’s resignation
One of the rumors that came out today is that part of this deal involves the resignation of Changpeng Zhao as CEO of the company.
CZ is the co-founder of Binance, and is the point person for the company and the exchange.
The problem is that the DoJ is also accusing him of wrongdoing himself, so it makes sense that part of the agreement involves his resignation.
Some of the details of the settlement were revealed by Bloomberg, while the news of CZ’s resignation was revealed by the Wall Street Journal.
The WSJ also reveals that CZ has reportedly agreed to plead guilty to violating U.S. criminal AML requirements.
This is not yet official and confirmed news, but it has not yet been denied either. Given the sources, and the lack of official denials, they are believed to be true.
The allegations against former Binance CEO Changpeng CZ Zhao
More details were revealed by Forbes.
The settlement was made by Binance with the Department of Justice and the Commodities Futures Trading Commission (CTFC), but not with the Securities and Exchange Commission (SEC).
In addition to charges of violating anti-money laundering laws, the CFTC also accused Binance of offering crypto derivatives to U.S. citizens without the mandatory registration to offer futures trading.
What is interesting, however, is that this settlement would end the investigation that began as far back as 2018 (Binance was born in 2017). The SEC investigation, on the other hand, should still be ongoing.
The reaction of the crypto markets
Since even after CZ’s resignation Binance will be able to continue to operate, and since the settlement closes the DoJ and CFTC criminal proceedings, the crypto market has not reacted badly.
However, the reaction of Bitcoin’s price, which has not fallen much below the $37,000 threshold around which it has been realizing for the past ten days or so, should be distinguished from that of altcoins.
In particular BNB (Binance Coin) for now is losing 6 percent, which is not even that much since it is simply back to the levels of seven days ago.
A bit of all cryptocurrencies are down today, but more or less with similar losses, i.e., relatively small. Among the main ones Polygon stands out (-10%), while among the top 100 sicca Celestia with -21%.
The fact is that although there may be doubts about the future of Binance, given CZ’s resignation and the $4.3 billion maxi-fine, the end of the DoJ prosecution was taken as substantial good news.
Positive notes on the Binance/CZ affair
Perhaps, however, some positive notes can also be unearthed in this affair.
The most important is the apparent end of Binance’s problems with the U.S. justice system, even if it is not quite over with the SEC.
Looking in particular at the price of BNB, one finds that a year ago, after the FTX bankruptcy, it had fallen below $270, only to ask for 2022 just above $230.
In the first two months of 2023 it had recovered well, pushing up to above $330, but the positive trend did not last long.
Indeed, as early as June it was right back to $230, and even between August and October it had even dropped to around $200.
It is clear that something during 2023 prevented Binance Coin from recovering its losses of 2022, while instead other cryptocurrencies even returned to the levels before the implosion of the Terra/Luna ecosystem.
Perhaps it is Binance’s legal troubles that have prevented BNB from recovering, so much so that in the past 30 days it had risen from $215 to $267.
With today’s drop it is back below $240, or a figure only slightly above that of late 2022.
The future of Binance and BNB
At this point, however, the limits that prevented BNB from recovering during 2023 what it had lost in 2022 may have evaporated.
In other words, BNB’s real rebound could start now, and not at the beginning of 2023 as, for example, BTC and ETH did.
Binance has also lost market share over the year, and perhaps with the resolution of legal problems in the US it might even recover a bit.
In this regard, however, it must be said that it has practically abandoned the U.S. market, so it is difficult for it to return to previous levels of dominance.
The situation is actually still in flux, but perhaps right now the future looks a little bit brighter than what was feared even until yesterday.
Despite this, however, there remains the $4 billion-plus maxi fine, which could weigh in no small part on the company’s balance sheet.
The future of CZ, now former CEO of Binance
Although he will no longer be CEO, CZ will remain the largest shareholder, and thus will retain control of the company.
He will also remain one of the world’s leading crypto influencers, second only perhaps to Vitalik Buterin.
It is hard to imagine him leaving the industry, and indeed he may even ask for another role in the company, leaving that of CEO to someone else he trusts.
Certainly the two-year period 2022/2023 will be remembered as a watershed year, not only for Binance but perhaps for the entire crypto industry.
