A Brazilian congressional committee has recommended the indictment of four Binance senior executives, including the company’s CEO and founder Changpeng Zhao. The committee, which had been investigating crypto-related Ponzi schemes in Brazil, has the authority to make suggestions, while the ultimate decision to proceed with indictments rests with Brazilian police, according to a report by Bloomberg.
Accusations of Fraudulent Management and Unauthorized Trading
The congressional committee has accused Zhao and three local Binance employees of fraudulent management, unauthorized offering or trading of securities, and operating a financial institution without proper authorization. This cloud of suspicion surrounding Binance in Brazil was highlighted in a report prepared by lawmaker Ricardo Silva.
“Binance said in an email to Bloomberg that it had made serious efforts to actively cooperate with the committee. The exchange firmly rejected any attempts to target Binance or expose its users and employees to baseless allegations.” – Binance statement to Bloomberg
In response to the allegations, Binance stated that it had made serious efforts to actively cooperate with the committee and firmly rejected any attempts to target the company or expose its users and employees to baseless allegations.
Call for Investigations and Penalties
The recommendation made by the committee, consisting of 28 lower house representatives, also requests the Federal Public Prosecutor’s Office to investigate the tax compliance of Binance’s local unit and Binance Capital Management, a separate entity. Additionally, the committee advised Brazil’s securities regulator, known as CVM, to probe Binance’s sale of derivatives in violation of a stop order. The committee’s final report characterized these ongoing transactions as a repeated breach of securities market regulations.
This is not the first time Binance’s Brazil unit has encountered regulatory challenges. The unit is already facing a CVM probe related to its sale of derivatives and had its proposed settlement offer worth 2 million reais rejected by the securities regulator in August. Consequently, further penalties and fines are anticipated for Binance’s local unit.
Adding to Binance’s woes in Brazil is the uncertain status of its proposed acquisition of Brazilian securities brokerage Sim;paul Investimentos, announced in March 2022. Binance had indicated that the approval of regulatory authorities, including the Central Bank of Brazil, would be required for the transaction. However, the necessary approval is yet to be obtained.
International Scrutiny from Regulators
While grappling with the Brazilian regulatory landscape, Binance is also facing heightened scrutiny from regulators worldwide. In the US, the exchange has been grappling with the Commodity and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), both of which have filed lawsuits against the exchange and its CEO.
Back in June, the SEC sued Binance and its CEO for their “blatant disregard of the federal securities laws,” unveiling 13 charges against the platform, including operating an unregistered exchange. The agency accused Binance of breaking the law by offering unregistered securities to the general public, including its BNB token and BUSD stablecoin.
The CFTC lawsuit accuses Binance of deliberately aiding US customers in evading restrictions on crypto trading imposed by its American affiliate. Rumors have also circulated about a potential indictment by the US Department of Justice against Zhao and Binance for possible violations of anti-money laundering laws.
