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A billion-dollar fortune at risk: Binance France removes Changpeng Zhao as sole shareholder

a-billion-dollar-fortune-at-risk-binance-france-removes-changpeng-zhao-as-sole-shareholder
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A billion-dollar fortune at risk: Binance France removes Changpeng Zhao as sole shareholder

Binance France, the French subsidiary of the largest cryptocurrency exchange, has wholly stripped company founder Changpeng Zhao of his shares.

According to French rules, a company’s majority shareholder cannot be a criminal. Thus, Binance France’s decision is intended to ensure that the crypto exchange does not lose the right to operate in the second-largest economy of the European Union.

Pappers information service says Binance France’s new shareholders are co-founders Yulong Yan and Lihua He, each owning 50% of the shares. Lihua He allegedly worked at Binance as the Chief Product Officer.

Yulong Yan co-founded Bijie Tech, a company Zhao created even before Binance to provide software to crypto exchanges. This company was closed in 2017.

Official representatives of the exchange did not reveal information about Binance France shares. In a statement, the platform said that Binance’s French division is changing its share and group structure as part of a global restructuring project under local regulations and obligations, following a formal notification sent by the Authority for Financial Markets (AMF) to Binance France.

“The new shareholders of Binance France are co-founding members of the Binance team, neither of whom have been involved in any historical issues. They each hold 50% of the capital of Binance France. This change will have no impact on the daily operations of Binance France and will not affect users.”

Binance announcement

In December 2023, AMF informed the company’s management that Zhao could no longer own the company. The reason was the charges brought against him by the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission.

Binance under the gun of French regulators

Last June, Le Monde reported that the Binance French branch had been under preliminary investigation since February 2022 for alleged illegal provision of crypto services and failure to comply with AML obligations.

The charges against the platform relate to its activities as an unregistered digital asset service provider. The prosecutor’s office also noted several acts of aggravated money laundering.

At the time, Binance Branch Manager David Prinçay said on-site inspections by regulators are part of the regulatory obligations that all financial institutions in the country must comply with. According to him, the company fully complies with local legislation and cooperates with the authorities.

Zhao, then the head of Binance, responded with a tweet with the number four, which means to ignore FUD and fake news. In France, he said, inspections of regulated businesses without prior notice are the norm for banks and now for crypto.

Zhao’s investigation and sentencing 

On April 30, Zhao pleaded guilty to money laundering charges and was sentenced to four months in prison.

U.S. District Judge Richard Jones’s sentence was significantly less than the three years that prosecutors had sought. Before his announcement, Jones accused Zhao of prioritizing Binance’s growth and profitability over complying with American laws.

Initially, the U.S. Attorney’s Office accused Binance of concealing around 100,000 suspicious transactions, including transfers to Hamas, Al Qaeda and ISIS. Prosecutors also claimed that the exchange supported the sale of child sexual abuse material and was the recipient of a significant portion of the extortion proceeds.

In addition, in June 2023, Binance and Zhao were charged by U.S. authorities with operating an unregistered exchange and misleading investors. It was alleged that Zhao used his Swiss fund Sigma Chain to inflate trading volume on the Binance platform.

As a result, in November last year, the U.S. Department of Justice decided that the crypto exchange must pay more than $4 billion for violating U.S. laws on bank secrecy and international emergency economic powers and for refusing to register as a money transmitter. Amid these allegations, Binance announced that Zhao is leaving his post as CEO.

Binance international failures

2023 was just the beginning for Binance in its proceedings with the authorities of various countries. Over the past few months, several regulators and governments have filed claims against the crypto exchange.

Nigeria

In March, Nigerian authorities asked Binance for information on the country’s top 100 users and their entire transaction history over the past six months. This happened after the arrest of two executives of the cryptocurrency exchange, Tigran Gambaryan, head of investigations at Binance, and Nadeem Anjarwalla, regional manager of the crypto platform in Africa.

The Nigerian government later filed a criminal case against Binance for tax evasion. The platform was accused of tax evasion on four counts. 

Philippines

In November 2023, the Securities and Exchange Commission of the Philippines (SEC) began introducing restrictions on access to Binance.

The Philippine regulator said that Binance is not registered as a company in the country and does not have the appropriate permits and licenses to operate. SEC officials said introducing restrictions on access to the trading platform will take about three months to give users time to withdraw funds from the exchange.

Russia

In September 2023, Binance left the Russian market and sold its business to CommEX. Afterward, users began migrating to the new platform.

However, at the end of March, CommEX announced a suspension of operations. The company cited a thorough analysis of the current situation and a review of strategic plans.

Will Binance France’s decision affect Zhao?

Zhao has maintained his leadership as the wealthiest person in the crypto industry for several years despite recent problems with regulators and a prison sentence.

Forbes experts said earlier that Binance remains the world’s largest cryptocurrency exchange by trading volume, generating about $9 billion in revenue last year. Journalists estimated Zhao’s fortune to be $33 billion at the beginning of April.

Zhao’s main source of wealth is his ownership of shares in Binance. Although he reportedly no longer owns Binance France, Zhao still controls shares in the exchange’s global division. Thus, the French branch’s latest decision is unlikely to undermine the cryptocurrency billionaire’s fortunes significantly.