Binance.US, the stateside sibling of the global crypto powerhouse, is reportedly cooking up a plan to dilute the lion’s share of its founder and CEO, Changpeng Zhao. Last year, Binance US raised $200 million from investors like RRE Ventures and Foundation Capital, valuing the company at $4.5 billion before the investment.
According to insider sources, discussions have taken place to find ways to reduce Zhao’s stake, signalling a potential shift in the company’s ownership. So why are they doing this? Let’s explore.
Regulatory Woes and Lawsuit Impact
The exploration of stake reduction comes in the wake of mounting regulatory challenges faced by Binance and its founder. The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and Zhao, accusing them of operating an “illegal” exchange and a deficient compliance program. The lawsuit alleged “willful evasion” of U.S. law and regulatory arbitrage. Binance.US executives believe reducing Zhao’s stake could help improve the company’s standing with U.S. regulators.
One key concern for Binance.US executives is the potential hindrance caused by Zhao’s involvement in the CFTC lawsuit. The company fears that as long as he remains the majority owner, it may face challenges in acquiring certain regulatory licenses required to operate in the United States. By exploring options to cut Zhao’s stake, Binance.US aims to address these concerns and improve its regulatory standing.
Binance has faced a series of regulatory setbacks in the United States this year. The attempted acquisition of Voyager Digital’s distressed assets was thwarted by the Securities and Exchange Commission (SEC), citing concerns about unregistered securities.
The exchange also encountered legal troubles with the CFTC and the Department of Justice, which implicated Binance in a money laundering case involving Bitzlato, a partner exchange. Furthermore, Binance-backed stablecoin BUSD faced scrutiny as an unregistered security, leading to a decline in its adoption and trading volume.
As Binance.US grapples with regulatory challenges, the exploration of reducing founder Changpeng Zhao’s stake highlights the company’s efforts to address concerns raised by U.S. regulators.
Will this move help them to get in the good books of regulators? Only time will tell!
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