CZ responds to reports of Binance investigation: story has no “teeth”

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Shortly after a Bloomberg report on Friday that cryptocurrency exchange Binance was under investigation for permitting US residents to place unlawful trades, Binance founder and CEO Changpeng Zhao (better known as CZ) dismissed the reports during a live AMA on Clubhouse, saying that the report had “no teeth.” 

“This is a topic that just came up, literally like a few minutes ago or a hour ago,” said CZ. “So number one, the news article said there was no, I don’t have it in front of me, there was no “misconduct,” I have to dig it up. So number one there was no report of misconduct from Binance, so the report kind of defeated itself.”

CZ noted that as a business Binance maintains a “no comment” policy on communications with regulators, which places the company in a difficult position with regards to rebutting the contents of the report, which cited a single anonymous source.

An investigation does not mean that “they’re trying to charge us, trying to do something with us,” and that the report could simply be a routine communication, he said.

Without citing examples, CZ said that similar instances of what he characterized as miscommunications have happened in the past, and that the “story doesn’t have any teeth.”

He also notably alleged that “self-perceived competitors” might bribe or pressure journalists to publish stories heavy on allegations and short on content. 

CZ has had a complex relationship with the media over this last year. Earlier this month, Binance quietly dropped a defamation lawsuit against Forbes and two of its journalists.

“We maintain a very collaborative posture with all agencies around the world, not just the US. We have an active dialogue with regulatory agencies,” he added.

Cracks in the geofence

The reports that the CFTC is investigating whether or not US users placed illegal trades on the exchange perhaps shouldn’t come as a surprise, given that as recently as November last year he admitted that US traders find “intelligent” ways to circumvent the ban.

This morning, however, CZ vigorously defended Binance’s KYC/AML policies.

“I can comment publicly that Binance probably has the strongest KYC/AML program in the industry,” he said. “[…] We do very careful, very strict KYC/AML. We also use very intelligent geofencing.”

He added that the company often accidentally “mislabels” travelers to the US, claiming that the standards are often “too strict.”

However, he also admitted once more that US users often try to circumvent the systems in place, and noted that the quality of their barriers have to “improve.” 

Ultimately he struck a hopeful tone that industry players and regulatory agencies can find common ground.

“Right now there’s kind of a gap between the industry players and the regulators. I want to see, hopefully, both sides extend their hand and bridge that gap.”