What was CZ thinking? That was the question that came to me while reading the Securities and Exchange Commission's 136-page complaint that dropped on Monday. What, I wondered, did Binance founder Changpeng Zhao think was going to happen when he set up a nominally arms-length U.S. subsidiary—and then had it flout nearly every compliance rule in the book? It could only be a matter of time until American regulators, who have been investigating Binance for years, caught on and came down hard. And that's what happened.
As the SEC revealed, Zhao treated Binance.US as a "puppet"—as described by the subsidiary's own former CEO—while instructing two of the platform's market makers, which he secretly controlled, to engage in rampant wash trading to pump up its volume. Meanwhile, Binance sloshed money—some of it customer funds—between Binance.US, the market makers, and the parent company. At some point, one of the market makers blew $11 million on a yacht. You get the idea.
