Privately held crypto exchanges are setting new lows in corporate governance. If you thought the initial bankruptcy filing for Sam Bankman-Fried’s FTX was stunning in what it revealed about how that company was run, check out the Commodity Futures Trading Commissions lawsuit against Binance today. Here’s a business empire controlled by one person, Changpeng Zhao, which has no board of directors and no fixed headquarters. Its executives routinely discuss all sorts of business matters over Signal, “with its auto-delete functionality enabled,” the complaint alleges, “even after Binance received document requests from the CFTC.” You can figure out what that means.
Even better: When a business partner wanted a compliance audit, Binance staffers hired someone they knew would do “a half assed” job, the lawsuit says, citing an executive. And as part of the audit, another staffer discussed writing a “fake” report for the nonexistent board of directors! None of this is the main point of the lawsuit, however. That would be the CFTC’s contention that Binance deliberately lured American investors to use its platform despite its failure to register with U.S. authorities, as is required by law. (Binance in turn called the complaint “unexpected and disappointing.”) For more details of the lawsuit, see our report here.
