Under French regulations, a company’s primary shareholder must be free of criminal charges. Consequently, Binance France’s action aims to safeguard the crypto exchange’s operational status in the EU’s second-largest economy.
According to Pappers information service, co-founders Yulong Yan and Lihua He now hold 50% ownership each in Binance France. Allegedly, Lihua He previously served as Binance’s Chief Product Officer.
Yulong Yan co-founded Bijie Tech, a company established by Zhao prior to Binance, aimed at offering software solutions to crypto exchanges. However, Bijie Tech ceased operations in 2017.
Official representatives of the exchange remained tight-lipped regarding the ownership structure of Binance France shares. However, they stated that Binance’s French division is undergoing alterations in its share and group arrangement as part of a worldwide restructuring initiative to comply with local regulations and obligations. This move comes following a formal notification from the Authority for Financial Markets (AMF) to Binance France.
“The new shareholders of Binance France are co-founding members of the Binance team, neither of whom have been involved in any historical issues. They each hold 50% of the capital of Binance France. This change will have no impact on the daily operations of Binance France and will not affect users.” – Binance announcement
In December 2023, the AMF notified the company’s management that Zhao was no longer permitted to possess ownership in the company. This decision stemmed from the charges leveled against him by the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission.
Binance under scrutiny from French regulators
In June of last year, Le Monde revealed that the French branch of Binance had been under preliminary investigation since February 2022 for purportedly offering crypto services illegally and failing to adhere to anti-money laundering (AML) obligations.
The platform faces charges for operating as an unregistered digital asset service provider. The prosecutor’s office also highlighted multiple instances of aggravated money laundering.
During that period, Binance Branch Manager David Prinçay stated that on-site inspections by regulators are standard regulatory obligations for all financial institutions in the country. He emphasized that the company fully adheres to local legislation and collaborates with the authorities.
At the time, Zhao, then leading Binance, replied with a tweet featuring the number four, signaling to disregard FUD (Fear, Uncertainty, Doubt) and fake news. He noted that in France, unannounced inspections of regulated businesses are customary for banks and now for crypto entities.
The investigation and sentencing involving Zhao
On April 30, Zhao admitted guilt to charges of money laundering and received a four-month prison sentence.
U.S. District Judge Richard Jones delivered a sentence significantly less than the three years urged by prosecutors. Prior to his decision, Judge Jones criticized Zhao for prioritizing Binance’s expansion and profitability over adhering to American laws.
Initially, the U.S. Attorney’s Office accused Binance of concealing approximately 100,000 suspicious transactions, including transfers to terrorist organizations, including Hamas, Al Qaeda, and ISIS. Prosecutors also alleged that the exchange facilitated the sale of child sexual abuse material and was the recipient of a significant portion of the proceeds of extortion.
Furthermore, in June of 2023, U.S. authorities brought charges against Binance and Zhao for running an unregistered exchange and deceiving investors. Allegations suggested that Zhao utilized his Swiss fund, Sigma Chain, to artificially boost trading volumes on the Binance platform.
Consequently, in November of the previous year, the U.S. Department of Justice determined that the cryptocurrency exchange was obligated to pay over $4 billion for breaching U.S. regulations concerning bank secrecy and international emergency economic powers, as well as for failing to register as a money transmitter. In the midst of these accusations, Binance disclosed that Zhao would be stepping down from his role as CEO.
Shortcomings in Binance’s global operations
The year 2023 marked merely the initial phase of Binance’s engagements with authorities from diverse nations. In recent months, numerous regulatory bodies and governments have lodged complaints against the cryptocurrency exchange.
Nigeria
During March, Nigerian authorities requested Binance to provide details regarding the top 100 users in the country and their complete transaction records from the preceding six months. This request followed the apprehension of two executives from the cryptocurrency exchange: Tigran Gambaryan, who served as head of investigations at Binance, and Nadeem Anjarwalla, the regional manager overseeing the crypto platform’s operations in Africa.
Subsequently, the Nigerian government initiated a criminal case against Binance on charges of tax evasion, alleging four counts of tax evasion against the platform.
Philippines
In November 2023, the Securities and Exchange Commission of the Philippines (SEC) commenced implementing limitations on Binance’s accessibility.
The Philippine regulatory body stated that Binance lacks registration as a company within the country and lacks the necessary permits and licenses for operation. SEC officials mentioned that implementing access restrictions to the trading platform would require approximately three months, allowing users sufficient time to withdraw funds from the exchange.
Russia
In September 2023, Binance exited the Russian market and transferred its business to CommEX. Subsequently, users commenced migrating to the new platform.
Nevertheless, by the end of March, CommEX declared a suspension of its operations. The company attributed this decision to a comprehensive examination of the prevailing circumstances and a reassessment of strategic objectives.
Will the decision made by Binance France have any impact on Zhao?
Despite recent regulatory challenges and a stint in prison, Zhao has continued to uphold his position as the wealthiest figure in the cryptocurrency industry for several years.
According to Forbes experts, Binance still holds the title of the world’s largest cryptocurrency exchange by trading volume, having generated approximately $9 billion in revenue last year. Journalists estimated Zhao’s fortune to be $33 billion at the start of April.
Zhao primarily accrues wealth through his ownership of shares in Binance. While reports indicate he no longer holds shares in Binance France, Zhao retains control over shares in the exchange’s global division. Consequently, the recent decision by the French branch is unlikely to substantially impact the cryptocurrency billionaire’s wealth.
0 Comments