Binance and founder Changpeng Zhao (CZ) have had a defining year in 2023. The world’s largest spot crypto exchange is surviving a criminal settlement with the US Department of Justice (DoJ) plus multi-billion dollar fines to the Commodity Futures Trading Commission (CFTC) and bureaus of the US Treasury.
All the while, it continues battling another unresolved, multi-billion dollar SEC lawsuit.
Before the start of 2023, alarm bells were already sounding that Binance was on the brink of serious trouble. It was the subject of several probes by US agencies.
When Russia invaded Ukraine in February 2022, Binance openly defied US government wishes to stop serving Russia-based users. By July that year, Reuters staff had kicked off a long-lasting feud with the firm. A string of exposes revealed Binance knowingly skirted US sanctions by serving clients in Iran, and that the exchange has washed billions in crypto for money launderers.
News that Binance was the subject of yet another probe by the Securities and Exchange Commission (SEC) erupted that same month. By November, the UK grilled Binance and other firms as part of an inquiry launched in the wake of FTX’s collapse.
So, by January 2023, it seemed likely that the world’s largest crypto exchange was on the first page of a monumental year.
Binance admits to commingling funds to kick off 2023
January 2: Data Finnovation researchers find evidence that BUSD was not always fully backed by US dollars as promised.
January 24: Binance admits it commingled B-token reserves, including BUSD, with customer funds. It blames the error on a failure of oversight and subsequently fuels concerns over its lack of financial backing.
March 10: The DoJ appeals a proposal by Binance US to buy Voyager Digital’s assets. The firm, which declared bankruptcy in July 2022, had worked out a tentative deal with Binance US worth billions of dollars. The decision to appeal also heightened suspicions that Binance US is under investigation by the DoJ.
March 14: In the UK, Binance freezes GBP deposits and withdrawals.
Spring showers bring accusations and denials
At the end of March, a CNBC report alleged that Binance helped traders bypass know-your-customer (KYC) controls. Three days later, the CFTC alleged that trading firms controlled by CZ through proxies traded against customers on Binance and Binance US.
These accusations were followed by steep bitcoin discounts triggered by the announcement of ramp closures in Australia, and a round of lay-offs by the end of spring.
May 1: Binance alleges that someone used ChatGPT to generate false reports that CZ had connections to the Chinese Communist Party.
The following day, an analysis shows that verified customer account logins for Binance can be traded on the dark web. Binance then decides to blame false identities for its failure to stop terrorism funding.
May 8: Binance pauses bitcoin withdrawals due to soaring transaction fees caused by demand for Bitcoin Ordinals.
We’ve temporarily closed $BTC withdrawals as the #Bitcoin network is experiencing a congestion issue.
Our team is currently working on a fix until the network is stabilized and will reopen $BTC withdrawals as soon as possible.
Rest assured, funds are SAFU.
— Binance (@binance) May 7, 2023
May 30: Binance Australia users liquidate enough bitcoin to trigger a 20% discount compared to other bitcoin markets and withdraw their funds. Local users were getting ahead of the firm’s subsequent fiat off-ramp closures by dumping their holdings, Binance said, which led to the sharp decrease in bitcoin price.
May 31: Anonymous sources say Binance is likely to conduct a round of layoffs despite a pledge to hire more people.
Binance’s EU and Australian headquarters raided, US banks bail
In the summer of 2023, it was clear that regulators across the globe were after Binance. The SEC accused the exchange of commingling customer funds and using them to buy an $11 million yacht. US banks severed ties with Binance.
By August, the crypto exchange was no longer welcome in the Netherlands or Germany.
June 5: Reuters finds evidence that Binance could improperly access Binance US bank accounts. That same day, the SEC files its initial complaint against Binance. Charges include the misrepresentation of its level of control over its US arm.
June 7: The SEC accuses Binance of spending customer funds on luxury items like an $11 million yacht. Commissioners say it commingled customer funds with corporate finances.
June 8: Binance alleges that SEC chairman Gary Gensler volunteered to be an advisor and should be recused from the SEC’s lawsuit against Binance. A day later, it suspends US dollar deposits and withdrawals after losing access to US banks.
June 16: Binance’s EU headquarters in Paris is raided by French police. Authorities said that the firm engaged in aggravated money laundering and offered “illegal” digital asset services to local users.
Binance Australia raided by regulator just weeks after Europe HQ raid
June 19: A report by Protos reveals that European nations are assisting the SEC’s investigation into Binance.
June 28: Nomo Bank suspends customer payments to the exchange.
July 5: The Australian Securities and Investment Commission searches Binance Australia’s offices for evidence of harm to investors.
July 18: Polymarket, a crypto predictions platform, gives Binance a 12% chance of becoming insolvent by the end of the year. That same day, it was reported that Binance’s money processor Advcash is accused of being a Russian money laundering operation.
July 20: Binance officially tells Dutch users to withdraw their assets but redirects them to an affiliated broker named Coinmerce.
July 26: Binance abandons efforts to obtain a license in Germany after being told that a digital asset custody license would not be granted.
Russian execs and Binance US chief jump ship
August 4: During a Coinbase earnings call, Brian Armstrong says Binance dumped its USDC holdings.
August 15: Binance requests a protective court order shielding BAM Trading executives from the SEC’s information requests, accusing the SEC of being on a “fishing expedition.”
August 18: Checkout.com ends its relationship with Binance, citing regulatory concerns.
August 21: Binance appears to suspend euro deposits and withdrawals through SEPA. The termination of its relationship with payment processor Checkout.com might have been a factor. However, it quickly deleted an X post about that suspension.
September 6: Binance’s Russian executives leave the company. The following week, Binance US CEO Brian Shroder leaves.
September 18: Binance US is caught using Ceffu, a wallet developed by Binance, to hold user funds. Binance denies having control over funds belonging to Binance US customers.
Apologies for any typos, but I was not expecting to be tweeting about this today.
It’s true that I am leaving @Binance, but I’m doing so on good terms. I continue to respect and support @cz_binance and am grateful for having had the incredible opportunity to work under his…
— Patrick Hillmann (@PRHillmann) July 6, 2023
Binance’s executive exodus found steam in the summer — though amicable on the surface, sources alleged several left over regulatory pressure.
Binance deals with Hamas ties and penalty payouts
November 2023 brought Binance more headlines than any other month in its history. Binance US suspended USD deposits and withdrawals; Binance was ordered to pay $13 million for dodging Australia’s legal hoops.
A string of accusations that Binance heavily facilitated Hamas were followed by the monumental news that CZ and his exchange had pled guilty to criminal charges. The $4.3 billion settlement ended investigations by the DoJ, CFTC, and two bureaus of the US Treasury — but CZ was forced to resign as CEO.
September 27: Binance sells its Russian division to CommEX.
October 5: A Forbes investigation indicates that Binance’s BNB ICO might have raised less than $5 million – approximately one-third of the official figure.
October 11: Binance begins rolling out self-trading prevention.
October 16: ChainArgos alleges that Hamas used Binance-controlled Tron addresses to receive 93.7 million USDT from a scam. Israel Defense Forces sanctioned those addresses.
1/ Several months ago the Israeli defense ministry released a list of Binance & Tron accounts that it claimed belonged to Islamic Jihad. We took a look at the Tron addresses and found some interesting things, starting with the fact that these wallets received $93.7 million USDT. pic.twitter.com/LkWOL2So1c
— ChainArgos (@ChainArgos) October 13, 2023
ChainArgos investigated names leaked by Isreal Defense Forces.
October 17: Binance US suspends US dollar withdrawals. It recommends stablecoin withdrawals as a work-around.
November 7: The SEC rebuffs Binance’s motion to dismiss its securities lawsuit, dismissing Binance’s “creative” interpretation of the US Supreme Court’s Howey Test.
November 9: Australia’s Securities and Investments Commission orders Binance to pay $13.1 million to users of Binance Australia Derivatives. That Securities and Investments Commission alleged that Binance misclassified users as wholesale instead of retail in order to dodge legal requirements.
The same day, it was reported that Binance moved 3.9 billion USDT-on-TRON from a cold wallet labeled “Binance-Cold 2” to a hot wallet called “Binance 3.” ChainArgos flagged the transaction.
Guilty pleas and orders for CZ to resign
November 15: Majority Whip Tom Emmer, Committee on Financial Services chairman Patrick McHenry, and 55 other members of the House of Representives sign a letter to President Biden and Treasury Secretary Janet Yellen. The letter lists Binance as a source of Hamas financing.
November 17: Binance begins delaying processing withdrawals in euros and USDT. The problem implies another issue with a third-party financial partner. Outages last at least a week.
November 21: CZ and Binance settle charges brought by the US Department of Justice and the CFTC. Binance will pay at least $4.3 billion in fines. CZ agrees to step down as Binance’s CEO and plead guilty to charges. A separate SEC lawsuit remains unresolved.
On the same day, Richard Teng replaces CZ as Binance’s CEO.
It is an honour and with the deepest humility that I step into the role of Binance’s new CEO.
We operate the world’s largest cryptocurrency exchange by volume. The trust placed on us by our 150m users and thousands of employees is a responsibility that I take seriously and hold…
— Richard Teng (@_RichardTeng) November 21, 2023
Binance’s new CEO steps into shoes of CZ, who’s now detained in the US.
November 27: A judge denies CZ’s request to leave the US prior to his sentencing. Citing his substantial net worth and ties to non-extraditing countries, a Seattle judge ruled that he must stay within the continental 48 states until his sentencing — approximately three months away.
November 28: CZ resigns as chairman of Binance US’s board of directors and transfers his voting rights.
December 19: A hacker reveals a $10,000 law enforcement request received by Binance.
A bright 2024 ahead: SEC suit, US gov’t monitor
CZ faces a US criminal trial in March 2024. Until then, he’s forced to reside in the country while his family are in Dubai. A judge ruled that a lack of an extradition treaty with the emirate, along with an inability for authorities to seize the majority of his funds, meant that he posed a significant flight risk.
Binance must still battle a lawsuit with the SEC, which alleges that BNB is a security, that CZ-controlled entities were responsible for suspect flow of funds between Binance and Binance US, and that these CZ-owned entities engaged in massive wash-trading.
To top it all off, Binance will need to navigate choppy financial waters in 2024. Penalty payments aside, Binance faces serious fees as a result of a plea deal requirement: a US government monitor.
