In a notorious development that sent shockwaves through the cryptocurrency industry, Binance, the largest exchange in the world, and its former CEO Changpeng Zhao (CZ) settled with the US government. However, former SEC official John Reed Stark has expressed concerns about the agreement’s implications. 

Stark believes that the Binance plea agreement, the guilty plea by CZ to anti-money laundering charges, may not bring the expected relief to the exchange. Instead, Stark suggests: 

The Binance Plea Agreement is Already Blowing Up. More Evidence of the Possibility of a Binance Collapse (And a 10-Year Sentence for CZ). 

Former SEC Official Raises Concerns Over Binance CEO’s Evasive Responses

In a recent post on X (formerly Twitter), Stark referenced a Richard Teng interview, who recently assumed the role of Binance CEO following CZ’s guilty plea and a substantial $4.3 billion legal settlement with the US Department of Justice (DOJ), the US Financial Crimes Enforcement Network (FinCEN), and the Commodity Futures Trading Commission (CFTC). 

During the interview, Stark believes Teng avoided providing direct answers to basic questions posed by Financial Times journalist Scott Chipolina, such as the location of Binance’s headquarters and the identity of the exchange’s auditor.

Stark emphasized the significance of Chipolina’s persistent questioning, asserting that it pales compared to the intense scrutiny that Binance and CZ will face from the DOJ and FinCEN. 

Stark highlighted the comprehensive cooperation agreements and monitorships established between Binance and these regulatory bodies, suggesting that the exchange’s lack of transparency and refusal to disclose its headquarters or undergo a traditional audit raise red flags.

Stark further discussed Noah Perlman, Binance’s Chief Compliance Officer and a former DOJ prosecutor, in an interview where Perlman expressed anticipation for the monitorships imposed by the DOJ and FinCEN. 

However, Stark questioned Perlman’s positive outlook, pointing out Teng’s contradictory statements during his interview with The Financial Times. While Perlman claimed that a cultural shift had already occurred within the exchange, Stark argued that Teng’s evasive responses indicated resistance to transparency, compliance, and cooperation.

The former SEC official highlighted the unprecedented and extensive requirements imposed on Binance by the DOJ and FinCEN, including the appointment of an independent compliance monitor for three years. 

Stark speculated that the monitorship’s terms, which have not been publicly disclosed, are likely to be onerous and highly invasive. Stark emphasized that the monitorships allow the DOJ’s investigative and litigation teams to uncover incriminating evidence while potentially sharing information with other government agencies.

On The Verge Of Collapse?

Stark concluded that the challenge for Teng lies in transforming Binance, a “historically secretive and non-compliant firm”, into a traditional and law-abiding financial entity. 

The former SEC official expressed skepticism about the exchange’s ability to meet the rigorous requirements of the DOJ/FinCEN cooperation and monitorship, predicting that the government will file additional charges against the exchange and CZ while the investigation and prosecution continue. Stark concluded:

A Binance collapse is inevitable – and, despite his assertions to the contrary, Perlman is not viewing the Binance criminal enterprise through rose-colored glasses – he is viewing it with blinders on.

In light of Stark’s analysis, it becomes evident that the future of Binance remains uncertain. As the exchange faces mounting scrutiny and regulatory pressure, the potential consequences may have far-reaching implications for the cryptocurrency industry as a whole.

The 1-day chart shows BNB’s sharp downtrend. Source: BNBUSDT on TradingView.com

Featured image from Shutterstock, chart from TradingView.com