A Brazilian congressional committee alleges that Binance moved $791.7 million with little regulatory oversight. Additionally, it claims that its CEO established multiple companies in Brazil to evade local financial regulations. The lack of oversight allegedly led to Binance being used in a pyramid scheme.
A Brazilian congressional committee accused Binance of being a platform for a fraudulent pyramid scheme and alleged that its CEO, Changpeng “CZ” Zhao, had illicit intentions by establishing multiple companies in the region.
“BINANCE was one of the companies used in the fraudulent financial pyramid scheme attributed to former waiter Glaidson Acácio dos Santos,” the statement states.
Binance and CZ Accused of Conducting Negligent Transactions
In a lengthy report, the committee alleges that Binance conducted approximately $791.7 million in transactions in Brazil without local regulators having knowledge of its operations:
“BINANCE moved BRL 40 billion in 2021 without Acesso, the regulated institution, having any control over who the clients were and whether the origin of the funds was legal”
Additionally, it alleges that Binance CEO CZ established multiple companies within Brazil to evade compliance with local financial regulations:
“Changpeng Zhao created an opaque network of legal entities, all controlled directly or indirectly by Zhao, with no defined business purpose and no purpose other than to evade compliance with the law.”
The committee stated that this lack of oversight led to a number of problems. The most important is the cryptocurrency exchange used in a pyramid scheme. Additionally, it refers to an alleged comment made by Binance’s compliance director. He apparently expressed the company’s desire to evade “regulation at all costs.”
It claims that local authorities in Brazil lack the means to track its users:
“Controller Changpeng Zhao claims in the media that the company’s headquarters are wherever it is located at the time, reflecting a deliberate approach to avoid regulatory costs borne by any legitimate company.”
Ongoing Legal Disputes Affect CZ and Binance
The aforementioned coincides with the recent accusations in the United States against CZ. A group of investors blames him for the fall of the FTX cryptocurrency exchange.
They declare that CZ’s tweets, published before the collapse of FTX, raised doubts about its liquidity and financial situation. Furthermore, they allege that it triggered the surge in withdrawals that ultimately precipitated the exchange’s collapse.
CZ has approximately 8.6 million followers. Meanwhile, CZ remains embroiled in an ongoing lawsuit filed by the United States Securities and Exchange Commission (SEC) against him and Binance.
In June, the SEC claimed that Binance and CZ falsely represented trading controls on subsidiary Binance.US, thereby deceiving customers into maintaining their investments on the platform.
As has been reported through the media, among the 13 charges that the SEC is suing Binance and its CEO are: allowing United States citizens to operate on Binance.com, the control of Binance.com and its CEO over the “independent” Binance.USD, mishandling its clients’ funds as if they were Binance.com’s own, market manipulation and misleading its investors about trading controls.
This new demand is in addition to that made by the United States Commodity Futures Trading Commission (CTFC). This regulatory body is suing Binance and its CEO for allowing United States citizens to operate on Binance.com, knowing that it was illegal.
Now, with the SEC and CFTC lawsuits underway, Binance’s future in the United States looks quite complicated. For the moment, a legal fight will begin between Binance and the United States government, which could be extensive.
By Audy Castaneda
