A congressional committee in Brazil has leveled serious allegations against cryptocurrency exchange giant Binance and its CEO, Changpeng “CZ” Zhao. The committee has accused Binance of being a platform for a fraudulent pyramid scheme and has raised concerns about CZ’s intentions behind establishing multiple companies in the region.
The Pyramid Scheme Allegations
The committee’s report claims that Binance was one of the companies used in a fraudulent financial pyramid scheme attributed to former waiter Glaidson Acácio dos Santos. According to the committee, Binance facilitated transactions worth approximately $791.7 million USD in Brazil without the knowledge or oversight of local regulators. This lack of regulatory control, the report suggests, made it easy for the crypto exchange to be exploited in the alleged pyramid scheme.
The allegations don’t stop at Binance’s involvement in the pyramid scheme. The committee’s report also alleges that CZ, the CEO of Binance, established multiple companies in Brazil with the apparent intention of evading compliance with local financial regulations. The report describes these entities as “an opaque network of legal entities” controlled directly or indirectly by CZ, seemingly with no legitimate business purpose other than to avoid legal oversight.
One of the most striking claims in the report is a statement purportedly made by Binance’s chief compliance officer, expressing the company’s desire to evade regulation at all costs. This assertion highlights a deliberate effort to operate outside the bounds of traditional financial regulations, which has raised eyebrows among Brazilian authorities.
Ongoing Legal Troubles
These allegations in Brazil coincided with a series of legal troubles for CZ and Binance. In the United States, CZ is facing allegations from investors who hold him responsible for the collapse of the crypto exchange FTX. It’s claimed that CZ’s tweets sowed doubts about the exchange’s liquidity and financial stability, causing a wave of withdrawals that eventually led to its downfall.
Furthermore, CZ is currently embroiled in an ongoing lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against both him and Binance. The SEC alleges that Binance and CZ falsely represented trading controls on the Binance.US platform, misleading customers and putting their investments at risk.
These allegations in Brazil, coupled with the existing legal challenges, have placed Binance and CZ under intense scrutiny, raising questions about their operations, intentions, and commitment to regulatory compliance in the world of cryptocurrency.