Talk about not reading the room. A week after Binance.US was charged for “blatant disregard” of US securities laws, its local office invited journalists to “discover the world of Binance”.
On the same day, I was invited to “an evening of discovery as we showcase the blockchain ecosystem, Binance” – a PR firm sent me an email titled, “Myth: Crypto is a Ponzi scheme.”
It was from a “senior conversation architect” and starts, “In our Crypto Myths – Debunked! series, we take the most common misconceptions and show them for what they really are. It is an important part of our efforts to promote crypto literacy and shake off the stigma of one of recent history’s biggest innovations.” Only at the end of the email does it show that this is actually on behalf of Binance.
You might recognise the headline of the email – it’s the “sponsored content” Binance is running on Daily Maverick and many other websites. It’s a propaganda campaign aimed at the media and high-end publication readers pushed out on multiple channels.
Sounds a little dodgy, like the Security and Exchange Commission (SEC) questioning why Binance moved “large amounts of money” totalling $70 billion through the shuttered Silvergate Bank and Signature Banks from 2019 to 2023.
Binance isn’t doing itself any favours
Last month, the SEC sued Binance and its co-founder Changpeng Zhao (known by his initials CZ) and its subsidiary Binance.US for “blatant disregard” of securities laws.
“Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” said SEC chair Gary Gensler.
“They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes so they could keep high-value US customers on their platforms.”
In essence, the authority says Binance flouted securities laws because it failed to register with the SEC and “subverted [its] own controls to secretly allow high-value US customers” to use its Binance.com international crypto exchange.
“Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes,” the SEC said.
And the money that flowed through the two defunct banks was huge.
“At times, the amounts being credited and debited during a single month amounts to movement of more than a billion dollars,” the SEC’s filing said.
“For example, in July 2021, one Signature Bank Binance Holdings account shows a starting balance of $468 million, deposits of $1 billion, withdrawals of $1.3 billion, and an ending balance of $179 million.”
As you might have guessed, I didn’t attend Binance’s event to “learn about [their] mission to revolutionise the crypto industry”. If this is the revolution, we don’t need it or want it.
I’m sure the millions of so-called retail investors who believed the crypto hype and invested their savings in exchanges like FTX, only to see them wiped out, would agree. Crypto enthusiasts resisted regulation and oversight by the SEC, only for the agency’s dire predictions to come true.
Watching Binance fumble its South African launch is like watching former US president Donald Trump deny he never returned his top-secret homework. All teachers can tell when kids are lying when they get caught out. Trump’s strategy, copied by so many, is to double down and pretend the real issues aren’t real. Binance is doing something similar.
On the face of it, the SEC seems to have a pretty solid case. Why would any person hand over their money – or crypto – to a company currently being sued by the US authorities for not following the very clear rules of investments?
- This column first appeared on Daily Maverick.