Binance Holdings Limited, the operator of the largest cryptocurrency exchange in the world, has organized a complex corporate structure to deliberately mislead regulators and secretly make money on American crypto investors. This statement is put forward by Forbes with reference to the document at the disposal of the publication..
It describes a plan to set up a company in the United States, code-named Taijiquan Formation. This is a reference to the Chinese martial art, which is based on the principle of using the enemy’s body weight against himself..
It is believed to be a serial entrepreneur, Harry Zhou, who is known for creating American versions of Chinese companies. According to Forbes, the document was presented to Binance CEO and founder Changpeng “CZ” Zhao in Q4 2018 by M&A Manager Jared Gross. Subsequently, the Binance.US exchange was launched, legally serving American investors, but, unlike Binance.com, not offering high-margin trading..
The presentation is divided into four main sections: objectives, recommended corporate structure, a plan for dealing with regulators and a long-term licensing plan..
The primary goal was to reduce the impact of regulation and avoid enforcement action by the US authorities. The document explicitly states the need to undermine “anti-money laundering law enforcement” by diverting the attention of the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), the Securities and Exchange Commission (SEC), the Commission on Commodity Futures Trading (CFTC); and the New York State Department of Financial Services (NYDFS). To this end, it was necessary to participate in the Department of Homeland Security (DHS) program to identify weaknesses in the financial system. The ministry said that Binance.US did participate in this program as part of the standard licensing procedure as a money transfer service provider..
As noted by Forbes, Binance itself is a client of the DHS-sponsored cryptanalyst company CipherTrace. The SEC is also a client of CipherTrace. The SEC declined to say whether their collaboration is part of a broader investigation into Binance or Binance.US. Earlier, the agency said it decided to enter into a contract with CipherTrace, because “it is the only known blockchain analytics tool with support for Binance Coin (BNB) and all tokens on the Binance network.”.
“Key Binance employees must continue to work outside the US to avoid enforcement risks,” the document says..
The same section says that the “education of Taijiquan” should act as a magnet for regulatory inquiries and accept nominal fines in order to avoid more serious problems with the authorities. The transfer of money to the parent company was to be carried out using license and service fees.
Also, the education was supposed to cooperate with the SEC, CFTC, NYDFS, knowingly not counting on the fact that any of them would approve of its activities. The aim would be to “demonstrate willingness to comply with legal requirements”. In addition, Taijiquan was to join the Cameron and Tyler Winklevoss Virtual Commodities Association..
Binance.US is not a member of the Winklevoss organization, but joined the Blockchain Association in August. Immediately thereafter, Coinbase exited it. “Unfortunately, recent weeks have shown us that the Blockchain Association is not interested in maintaining the membership criteria that we developed to strengthen the organization’s mission,” Coinbase said at the time, without specifying specific names..
“Forbes has learned that the ‘Taijiquan Document’ is currently circulating among the legal, accounting and other firms associated with Binance. It is rumored that the FBI and the IRS may be investigating. In a phone call, the FBI agent initially denied knowing Binance and hung up. Later, he officially announced: “No comment,” “the publication says..
CZ reacted to the Forbes post by calling it “FUD”, which is aimed at spreading doubt in the community. “The statements and accusations in the article are incorrect. The entire article is based on a third party document. The named document was not prepared by a Binance employee (former or current). Anyone can prepare a “strategy document,” but that doesn’t mean that Binance is following it. We do not recognize this document, “he said, after which he described in detail the actions of Binance aimed at ensuring widespread compliance with applicable legal standards..
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