๐ฅ 7 things to know: CFTC vs. Binance
GM. This is Milk Road. Weโre like a long sip of water from the garden hose on a hot summer day: thereโs nothing better than us.
Here's what we're serving up for you today:
CFTC sues Binance ๐
Microstrategy buys more Bitcoin ๐ค
Gucci teams up with Yuga Labs ๐
Prices as of 9:30 AM ET
Today's edition is brought to you by Arthouse Spirits DAO, an exclusive NFT-gated community for investors.
CFTC SUES BINANCE ๐
Itโs happening, folks. The U.S. government is coming after the worldโs largest crypto exchange.
The Commodities Futures Trading Commission is suing Binance, CEO/cofounder Changpeng Zhao (AKA CZ,) and ex-chief compliance officer Samuel Lim for allegedly breaking U.S. laws and offering unregistered futures & options trading.
CZ called the suit โunexpected and disappointingโ in a blog post late Monday.
We read through the entire 74-page lawsuit so you donโt have to. And there was more tea spilled on the crypto giant than at the Boston Tea Partyโฆ
Here are the top 7 piping hot allegations:
1/ Binance secretly let U.S. customers use its platform
The U.S. banned Americans from using Binanceโs platform in July 2019. But apparently CZ pulled the ole sneak-a-roo…
Binance told U.S. users to use Virtual Private Networks (VPNs) as a loophole.
VPNs are the magic cloak of the internet. They keep a userโs true location hidden so even if customers are in the U.S., they can make it appear as though theyโre in Europe. Plus, no AML or KYC verification needed.
CFTC
2/ CZโs been counter-trading his own customers
Binance traded for profit on its own platform via ~300 โhouse accountsโ that were all owned by CZ and two other trading firms. And CZ has traded on Binance via two individual accounts.
CZ, you know thatโs not exactly what โmarket makerโ is supposed to mean, right?
He said thatโs not true though in his post. Binance โdoes not trade for profit,โ and he has a Binance Card account and then one for his own crypto holdings. But he and his employees arenโt allowed to make more than one trade every 90 days.
The CFTC says otherwise: that the house accounts were exempt from Binanceโs insider trading policy.
CFTC
3/ Binance faked a compliance audit
Binance employees allegedly created a fake, โhalf-assedโ audit in the fall of 2020.
Around the same time, a Money Laundering Reporting Officer (MLRO) wrote, โI HAZ NO CONFIDENCE IN OUR GEOFENCINGโ when talking about the exchangeโs ability to stop money laundering.
CFTC
Thatโs like trusting your surgeon who โHAZ NO CONFIDENCE IN OUR OPEN-HEART SURGERY.โ
5/ Binance alerted its VIP members if the cops asked about their account
If the law requested Binance to freeze a VIP memberโs account for whatever reason, its VIP team would notify the user โthrough all available means.โ The account would unfreeze after 24 hours.
CFTC
Whatever happened to good ole unlimited spa access for VIP members…
6/ Binance knew criminals used its platform, but didnโt care
Lim said in a chat in early 2019 that terrorists usually send โsmall sumsโ since โlarge sums constitute money laundering.โ
He made the comment after he got information โregarding HAMAS transactions,โ referring to the militant org. Limโs colleague replied, โCan barely buy an AK47 with 600 bucks.โ
And Lim said โlike come on. They are here for crimeโ in February 2020 while talking about Binance customers from Russia. The MLRO agreed and said, โWe see the bad, but we close 2 eyes.โ
7/ CZ made Binanceโs corporate structure opaque to maintain control of everything
There are ~120 entities in Binanceโs corporate structure. CZ has controlled all of them at one point, either directly or indirectly.
CZโs like that partner in high school that wonโt let you do any part of the science project.
CFTC
So what does the CFTC want? Lots of fines, a ban on Binance from trading commodities in the U.S., and a special court appearance from CZ himself. They want all the smoke!
Here are the best reactions from Twitter:
People thinking this is the End of Binance and Crypto because CFTC Sued Binance.
This is how it will end.
1. Government will ask Binance to pay a Huge Fine.
2. The fine will be equal to how much CZ spends on Lunch on the days he doesn’t have lunch.
3. Back to Business.
— Emperor๐ (@EmperorBTC)
Mar 27, 2023
The CFTC suing Binance is a nothing burger
The US hates innovation and crypto
All the crypto companies will go over seas and just pay a fine for their “bad behavior”
Americans down bad https://t.co/NeYGKWlZcH
— Wendy O (@CryptoWendyO)
Mar 27, 2023
Binance and CZ sued by the CFTC.
US government was cool with SBF drafting crypto legislation with Gensler and sending user funds to politicians, but ever since their boy got exposed it’s been an all-out assault on all things crypto by the US Government. Wild.
— Stack Hodler (@stackhodler)
Mar 27, 2023
The Milk Road Take: This is the biggest step the U.S. has made to crack down on Binance. And the exchange doesnโt have a clear, easy way out.
On trial, Binance will have to be super open with authorities about how it operates. That could open the closet to more of the companyโs skeletons.
If it takes the settlement route, a hefty fine could knock it on its back. And if Binance loses the case, itโll have to pay back all of its profits it made from U.S. users.
Either way, CZ doesnโt seem too bothered. He tweeted โ4โ right after the news came out for his followers to dismiss the lawsuit as simply creating fear, uncertainty, and doubt and nothing more.
He might have to do better than a cheeky tweet and a blog post if he wants to make it out of this unscathed.
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MICROSTRATEGY BUYS MORE BITCOIN๐ค
Microstrategy is back in the headlines. This time, the Bitcoin-loving business intelligence firm made two more major moves:
1/ Repaid a 9-figure loan to Silvergate
Microstrategy received a $205M loan from Silvergate Bank back in March 2022. It was scheduled to be paid off by March 23, 2025. Or elseโฆ
But then Silvergate shut down…
As a result, Microstrategy got a 22% discount and only had to pay $161M. (We call it the Broke Bank Discount Double Checkโข)
Microstrategy completed the loan payment over the weekend and to celebrate itโฆ
2/ Bought more Bitcoin
Microstrategy bought another 6,455 BTC for $150M, bringing its total holdings toโฆ *checks notes*… 138,955 BTC, worth a whopping $3.75B.
The crazy part? Microstrategy now owns 1 out of every 151 Bitcoin that will ever exist.
It also now owns 2x more BTC than the top 10 corporate crypto treasuries in the world, combined. That includes companies like Tesla, Coinbase, and all the big Bitcoin miners.
Check it out:
Microstrategy is still down ~$400M on its BTC investment (ouch) but they donโt seem phased. They are the HODLER of HODLERS, the ones who hold Bitcoin with an iron grip.
So although it was Microstrategyโs first big buy of the year, it probably wonโt be the last.
๐ฅ MILK & COOKIES ๐ช
Gucci is teaming up with Bored Apes creator Yuga Labs.ย The pair havenโt disclosed much, except that the โfirst chapterโ of a multi-year partnership kicks off this week.
Kokomo Finance rugged a bunch of its users.ย The team exited the protocol and stole $4M of user funds. Ouchโฆ
Peter Schiff, a long-time Bitcoin critic, said he might buy a few thousand Bitcoins โjust for kicksโ when he turns 70. He turned 60 last week.
A hotel inspired by the Wassies NFT project just opened in Singapore. It has 49 rooms, and Wassie NFT holders can get a discount of up to 20%.
MILKY MEMES ๐คฃ
That's a wrap for today. Meet us on Twitter to talk all about it. Itโs kinda like a family BBQ but better – no screaming kids, awkward photos, or drunk uncles telling weird storiesย (@MilkRoadDaily)
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Mar 28, 2023
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