Binance is in hot waters again, but this time it’s not for misappropriating user funds like FTX or using not backing up their claims. No, this time, it’s for a certain report by the codename ‘Tai Chi.’
This past Sunday, the Wall Street Journal reported specifically on internal communications that poke larger holes in Binance’s oft-repeated assertions that Binance.US is an independent entity free from the international site’s influence.
Binance claims the U.S. site merely licenses the international exchange’s technology and brand.
More Details About the Tai Chi Strategy
However, these claims were exposed as an elaborate subterfuge as early as 2020, when Forbes reported on Binance’s illegal ‘Tai Chi’ strategy. Bam Trading Services, the company that controls Binance.US, just so happens to be under the purview and control of Binance’s now infamous and ever-so-slightly controversial founder Changpeng ‘CZ’ Zhao.
Despite Binance’s constant denials, Reuters subsequently confirmed the existence of the Tai Chi strategy, which involved setting up a supposedly independent, regulatory-friendly U.S. licensed operation to distract attention from Binance.com’s ongoing reliance on U.S. customers for a significant chunk of its business.
In the new investigation, revelations include frantic messages from a Binance software developer in September 2019 after a Shanghai-based staffer mistakenly allowed trading on Binance.US ahead of the exchange’s scheduled launch.
CZ replied that the culprit was “a guy here in Shanghai, mistake operation.”
Who’s Controlling the Infrastructure?
The Binance.US tech infrastructure was controlled from Shanghai until at least mid-2021, and the Shanghai software team was contracted by the international Binance, not the U.S. version.
A Binance US spokesperson told the Journal that U.S. customer data was stored in the U.S., and there was no commingling of user data between the two allegedly independent entities, or so they said (clearly, that was determined to be untrue).
One month before Binance.com allegedly cut off its U.S. customers, Binance’s then-Compliance Chief Samuel Lim posted a message in a Binance chat on Telegram suggesting ways for Binance.com to retain its U.S. customers, who at the time accounted for over 18% of Binance.com’s page views. Among Lim’s suggestions for U.S. customers?
“Have them be creative and VPN [virtual private network].”
Last month, Reuters revealed that CZ had more control over Binance.US’s bank accounts than the latter company’s CEO. Over the first three months of 2021, Binance transferred $404 million from Binance.US accounts at California’s Silvergate Bank to a CZ-controlled company, leading the then-CEO of Binance.US Catherine Coley to contact a Binance.com exec to complain that “no one mentioned” these “unexpected” transfers to Binance.US staff.
Difference Between Binance and Binance.US
“Assertion that Binance.US is fully independent is eerily similar to claims Sam Bankman-Fried made regarding the distinction between FTX.US and FTX—claims that appear to be false, given that FTX.US has filed for bankruptcy, its users have lost access to their funds, and its new CEO has declared that it is, in fact, insolvent.”
Harry Zhou, the architect of Binance’s ‘Tai Chi’ strategy, took to Binance’s Telegram channel to call the Google Form gaffe “, particularly concerning here because this form has to do with opening client accounts. If I were an [attorney general], I would cite this as evidence that it is, in fact, Binance, an ‘unregistered foreign-based [money services business]’ onboarding the US clients.”
Zhou won praise from Binance’s then-CFO Wei Zhou for reminding employees to avoid mimicking a Binance.com ‘tone’ when writing copy that would appear on Binance US. Wei Zhou concurred, urging staff to
“Sit in ‘Binance.US’ shoes when drafting.”
