Binance and Founder
Binance has been the subject of lawsuits and challenges from regulatory authorities throughout its history. As a result, Binance has been banned from operating or ordered to cease operations in some countries, and has been issued fines. It has been alleged that Binance could be used as a funding mechanism for terrorist groups. In November 2023, the company pleaded guilty in a U.S. federal court to money laundering, unlicensed money transmitting, and sanctions violations.
History
2013–2017: company beginnings and move out of China
CEO Changpeng Zhao founded Fusion Systems in 2005 in Shanghai; the company built high-frequency trading systems for stockbrokers. In 2013, he joined Blockchain.info as the third member of the cryptocurrency wallet's team. He also worked at OKCoin as CTO for less than a year, a platform for spot trading between fiat and digital assets.[10] He was hired at this position in 2014 by Yi He, with whom he co-founded Binance several years later.[4]
The company was founded in 2017 in China but moved its servers and headquarters out of the country in advance of the Chinese government's ban on cryptocurrency trading in September 2017.[11] Zhao asked He to join Binance, and she helped rewrite parts of the white paper for Binance's $15 million initial coin offering.
including phishing, viruses and other attacks" and structured their transaction "in a way that passed our existing security checks."[24] Binance halted further withdrawals and deposits but allowed trading to continue. The site pledged to reimburse customers through its "Secure Asset Fund for Users (SAFU)".[25][26] Withdrawals resumed by 19 May.[27][better source needed]
In June 2019 the company announced it would prohibit US passport holders as well as anyone residing in the US, and would set up a new entity binance.us to support those customers.[28] Later in 2023 Forbes leaked a document allegedly from Binance titled "TaiChi" that proposed this regulatory solution to reduce US regulatory risk.[29] Binance subsequently denied the document, sued Forbes for defamation, and subsequently dropped the lawsuit.[30]
In September 2019, the exchange began offering perpetual futures contracts, allowing leverage as high as 125 times the value of the contracts.[31] In November 2019, Binance announced it was acquiring Indian bitcoin exchange WazirX, which became disputed in August 2022 when Binance founder Zhao claimed the deal was never signed.
2018–2019: launch of stablecoin and security breach
In January 2018 it was the largest cryptocurrency exchange with a market capitalization of $1.3 billion,[12] a title it had retained as late as April 2021, despite competition from Coinbase, among others.[13]
In March 2018, Binance announced its intentions to open an office in Malta after stricter regulations in Japan and China.[14] In April 2018, Binance signed a memorandum of understanding with the government of Bermuda.[15] Months later, a similar memorandum was signed with the Malta Stock Exchange to develop a platform for trading security tokens.[16] In 2019, the company announced Binance Jersey, an independent entity from its parent Binance.com exchange, with the aim to expand its European influence. Jersey-based exchange offers fiat-to-cryptocurrency pairs, including the Euro and the British pound
In April 2018, Binance launched the Binance Charity Foundation. The charity's goal is to support the advancement of blockchain-enabled philanthropy with a focus on third-world countries.[18]
In June 2018, Binance and three other firms raised $65 million for sports blockchain company Chiliz.[19]
In July 2018, Binance acquired Trust Wallet, a decentralized cryptocurrency wallet for an undisclosed sum. However, Binance, confirmed that the compensation is a mixture of cash, Binance stock, and a portion of its BNB token.[20]
In August 2018, Binance along with three other big exchanges raised $32 million for a "stablecoin" project. The idea of stablecoins is to provide a cryptocurrency without the notorious volatility of Bitcoin and other popular digital assets.
In January 2019, Binance announced that it had partnered with Israel-based payment processor Simplex to enable cryptocurrency purchases with debit and credit cards, including Visa and Mastercard. The purchases are subject to Simplex's local bank policies and are limited to Bitcoin, Ethereum, Litecoin and Ripple's XRP.[22]
On 7 May 2019, Binance revealed that it had been the victim of a "large scale security breach" in which hackers had stolen 7,000 Bitcoin worth around $40 million at the time.[23] Binance CEO Changpeng Zhao said the hackers "used a variety of techniques, including phishing, viruses and other attacks" and structured their transaction "in a way that passed our existing security checks."[24] Binance halted further withdrawals and deposits but allowed trading to continue. The site pledged to reimburse customers through its "Secure Asset Fund for Users (SAFU)".[25][26] Withdrawals resumed by 19 May.[27][better source needed]
In June 2019 the company announced it would prohibit US passport holders as well as anyone residing in the US, and would set up a new entity binance.us to support those customers.[28] Later in 2023 Forbes leaked a document allegedly from Binance titled "TaiChi" that proposed this regulatory solution to reduce US regulatory risk.[29] Binance subsequently denied the document, sued Forbes for defamation, and subsequently dropped the lawsuit.[30]
In September 2019, the exchange began offering perpetual futures contracts, allowing leverage as high as 125 times the value of the contracts.[31] In November 2019, Binance announced it was acquiring Indian bitcoin exchange WazirX, which became disputed in August 2022 when Binance founder Zhao claimed the deal was never signed
2020–2023: acquisitions and investments
On 21 February 2020, the Malta Financial Services Authority (MFSA) issued a public statement responding to media reports referring to Binance as a 'Malta-based' cryptocurrency company. The statement noted that Binance "is not authorized by the MFSA to operate in the cryptocurrency sphere and is therefore not subject to regulatory oversight by the MFSA." The MFSA added that it was "assessing if Binance has any activities in Malta which may not fall within the realm of regulatory oversight."[33]
In July 2020, Binance announced a "strategic partnership" with a Chinese state-owned enterprise under the State-owned Assets Supervision and Administration Commission of the State Council and that Binance had joined a group "aiming to facilitate" the Belt and Road Initiative.[34][35]
On 28 October 2020, Forbes staff released leaked documents showing that Binance and Changpeng Zhao created an elaborate corporate structure designed to intentionally deceive United States regulators and secretly profit from cryptocurrency investors located in the country.[5] Binance officially blocks access from IP addresses located in the United States, but "potential customers would be taught how to evade geographic restrictions", Forbes claimed
In May 2021 it was reported that Binance was under investigation by both the Internal Revenue Service and the United States Department of Justice on allegations of money laundering and tax offenses.[36][37][38]
In February 2022, Binance took a $200 million stake in Forbes.[39] It's unclear if this investment was ever completed. In May 2022, Forbes Global Media Holdings halted plans to go public via a merger with Magnum Opus Acquisition Ltd, a Hong Kong-based special-purpose acquisition company.[40] Zhao said the plan had "changed a little bit, but I believe that's still in discussions."[41] In February 2023, Zhao tweeted his disappointment that Forbes "continues to write baseless articles" about Binance.[42]
In March 2022, amidst the 2022 Russian invasion of Ukraine, Binance's CEO Changpeng Zhao, refused to ban users from Russia, citing "financial freedom".[43] Binance later softened the tone of their opposition but not their policy, and also pointed to their donation of $10 million for humanitarian needs in Ukraine.[44]
In April 2022, Reuters reported that, in 2021, Binance shared information with Rosfinmonitoring about funds raised by late Russian opposition leader Alexei Navalny's network.[45][46]
However, in March 2023, the exchange banned Russian residents from buying euros and dollars through its p2p service. European users, in turn, lost the opportunity to buy rubles.[47]
In September 2023, Binance announced it was leaving Russia and selling its business to the CommEX platform. Accounts of Russian users will be transferred to the new platform within a year.[48]
On 27 May 2022, Binance announced the registration of its legal entity in Italy, and has plans of opening offices and expanding the local team in the area. CEO Changpeng Zhao also shared information regarding Binance's registration with France's market regulator. At the time, the company was also seeking registration in more European countries, such as Switzerland, Sweden, Spain, Netherlands, Portugal and Austria.[49] Binance registered to operate in Spain in July 2022,[50] and in Sweden in January 2023
On 13 June 2022 Binance announced that users would, for an unspecified period of time, be unable to withdraw their funds held in Bitcoin, as the value of cryptocurrencies suffered serious declines.[53] Two hours after that announcement, Bitcoin withdrawals were allowed to resume.[54][better source needed]
Binance has a strong brand presence in Africa. Binance sponsored the Africa Cup of Nations in 2021.[55][56] It is also taking crypto education to many countries on the continent.[57]
Binance invested US$500 million towards the acquisition of Twitter by Elon Musk that completed in October 2022. Following the investment, the company announced the creation of a team to work on how blockchain and cryptocurrencies could be helpful to Twitter.[58][59]
On 8 November 2022, Binance offered to buy rival cryptocurrency exchange FTX's non-US operations (FTX.com) to help cover the latter's liquidity crunch.[60][61] Binance backed out of the deal the next day citing concerns about FTX's business practices and investigations by US financial regulators.[62]
On 30 November 2022, Binance purchased Sakura Exchange. The acquisition allowed Binance to re-enter the Japanese cryptocurrency market.[63][64]
In July 2023, several senior executives resigned from the company.[65] The Wall Street Journal reported that Binance had cut its global workforce by as many as 1,000 staff.[66] CNBC reported that the number of staff cuts could total 3,000 by the end of 2023.[67] Zhao didn't deny layoffs were occurring but claimed both the reported numbers and the reasons for the senior executive departures weren't accurate. In June 2023 Binance had 790 million US dollars in outflows after the SEC announced its lawsuit and Forbes reported that the company had 120 million users globally.[68] On November 21, 2023, US authorities convicted Binance on multiple charges—including violations of the Bank Secrecy Act, money laundering schemes, unlicensed money transmitting, and sanctions violations. As part of the plea deal, the company agreed to pay $4 billion in fines, and Changpeng Zhao stepped down as CEO with a $50 million fine. Zhao was succeeded by Richard Teng.[69]
On January 31, 2024, Binance was sued by the US victims of the 2023 Hamas-led attack on Israel, as well as their families, in Manhattan federal court for allegedly facilitating Hamas's terrorist activities by providing a funding mechanism for Hamas. The plaintiffs include released hostages of Hamas and families of victims who were killed in the attack
