In recent days, the crypto exchange Binance, and its now ex-CEO, Changpeng Zhao, have been in the news. In question, their legal setbacks with the American Department of Justice (DOJ). The government institution basically suspects them of having violated American financial laws on several points and has opened an investigation. Investigations that the DOJ ultimately decided to suspend under several conditions which undoubtedly have direct consequences on the company. This, by collaterally affecting the crypto market. In this article, we take an overview of this story which, in recent days, has kept the entire crypto sphere in suspense.
Act I: The unexpected departure of Binance compliance experts
This is a fairly innocuous fact which does not seem to have any direct links to Binance’s setbacks with the DOJ. However, in hindsight, the departure of Jennifer Hicks and Suleiman M., two major former executives of Binance’s compliance team, was not entirely trivial. Because, even if the company, like others, is experiencing waves of resignations, we can wonder why these two executives in particular are leaving the ship at this precise moment. Especially since the DOJ investigations against the company had been leaking for many months.
Not to mention that Jennifer Hicks notably announced her departure, only two months after her appointment as senior manager of the fight against terrorism at Binance. Unlike Suleiman M., who officially mentioned “a recent dismissal”, there is reason to wonder about Jennifer Hicks. Maybe she felt a blow coming? Regardless, barely a few hours passed between the announcement of the departure of these experts, and the news of the record fine imposed on Binance.
Act II: The hammer blow of the record DOJ fine
While it is already experiencing a particularly delicate situation in the crypto ecosystem, Binance is seeing its reputation deteriorate a little further. American justice is demanding from the firm the payment of a sum of money to put an end to the investigations launched against it. And the funds requested from the company are not peanuts. In fact, we are asking the company for nothing less than 4 billion dollars! A colossal sum which would be used to avoid a trial which she could also lose.
But that’s not all. Because this fine is in fact only one of the conditions of the arrangement proposed to Binance to avoid a legal battle from which it would not recover. Another condition, certainly the one that has the most impact, is the resignation of Changpeng Zhao from his position as CEO of Binance.
The price to pay is expensive, but you have to decide, and quickly! In the meantime, within the crypto ecosystem, there is speculation. Experts and analysts speak out, each explaining why Binance should seize the unexpected pole that the DOJ is offering it. And above all, the positive consequences that such an option could have not only on the company, but also on the crypto market as a whole.
Act III: The thunderclap of change at the head of Binance
Even though some experts and analysts have raised the disadvantages for Binance of accepting the DOJ’s proposal, it is like thunder in a starry sky! Not only has Binance agreed to pay the $4 billion fine, but its CEO will immediately announce his resignation from the position of CEO. A probably forced choice according to the crypto community, which is basically an admission of guilt for facts that the DOJ could prove. Besides, the boss pleaded guilty to several wrongdoings, including money laundering. This, by paying bail $175 million to remain free of his movements.
Regardless, it is now Richard Teng who presides over the destiny of Binance as its new CEO. With this transition which has not taken long, a single question torments experts and analysts. That of knowing whether Richard Teng, an executive with around thirty years of experience in regulatory matters in particular, is the man for the job.
We imagine that his financial expertise and his time as head of the Abu Dhabi financial regulatory authority would be major assets in his new role. There is certainly hope. But in reality, righting the Binance ship which, for several months, has seen its market share sink is not easy. For Richard Teng, it will be necessary to reassure American regulators by ensuring that Binance is put on track for regulatory compliance. The new boss will above all have to allay the doubts of the company’s approximately 150 million crypto users. Several of them are in full doubt and there is reason to be so.
Act IV: From short-term effects to long-term prospects for Binance
It should be noted that this epic involving the crypto firm Binance and the US Department of Justice had immediate repercussions. These effects particularly concerned BNB, Binance’s native asset.
After soaring, the crypto saw its valuation collapse by 8%, in just a few hours after the announcement of Changpenp Zhao’s resignation. As this paper comes under pressure, BNB is trading around $235. The asset certainly saw a slight increase of 0.07% over the 24 hours. But over the past week, BNB has lost more than gained in valuation since its current price expresses a weekly loss in value of 3.04%.
Another major consequence of the Binance-DOJ agreement is the effect of the latter on the crypto market overall. Thus, this development has, as if by a domino effect, affected several major cryptocurrencies with an impact felt differently by each of them. Cryptos like Bitcoin and Ethereum, in addition to altcoins like Ripple, Solana and Cardano were affected by Binance’s agreement with the DOJ. It is estimated that following this affair, the total crypto market capitalization, for a moment, lost $60 billion. This, for a reduction estimated at less than 1.4 trillion dollars. As we can see, the crisis is of obvious magnitude.
The question then arises of the medium and long term prospects, first for Changpeng Zhao, then for Binance and the crypto market. As for the former CEO of Binance, it is difficult to pronounce on his fate. Because the latter is now awaiting trial and has been authorized to remain in the United Arab Emirates (UAE) where he currently lives. We imagine that his fate depends intimately on this expected court decision. The latest news is that the crypto expert has broken his silence and spoken out about his mental stability despite legal challenges.
As for the company he founded and positioned as the largest crypto exchange in the world, it should do well. At least this is the opinion of experts who believe that the situation does not really affect the financial health of Binance. The latter remains the market leader, but will now have to work hard to hold this place, due to strong competition from other exchanges like Coinbase.
Regarding the crypto market, finally, it seems that despite its fragility, it will have to prepare to face regulatory austerity. Sam Bankman-Fried with FTX, Do Kwon with Terra Labs, and now Chagpeng Zhao from Binance… “The crypto industry is a circle of crooked technological geniuses”, must now say to American financial regulators who find themselves strengthened in their controversial regulatory policy. As proof, the Commodity Futures Trading Commission (CFTC) now seems to want to get its hands on other “bad apples” of the crypto ecosystem.
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