In a significant setback to Binance’s global expansion plans, a Brazilian congressional committee has recommended the indictment of four senior leaders, including the company’s founder and CEO, Changpeng Zhao, also known as CZ. The committee’s findings come as a result of their investigation into crypto-related Ponzi schemes operating in Brazil, with the recommendations now awaiting a decision from Brazilian law enforcement authorities on whether to proceed with actual indictments.
The committee has accused Changpeng Zhao and three local Binance employees of a range of financial infractions, including fraudulent management, offering or trading in securities without prior authorization, and operating a financial institution without proper authorization. These allegations cast a shadow of suspicion over Binance’s activities in Brazil, as described by lawmaker Ricardo Silva in the report accompanying the committee’s recommendations.
Binance, one of the world’s largest cryptocurrency exchanges, issued a statement in response to the recommendations, asserting that it had made significant efforts to actively cooperate with the committee throughout their inquiry. The exchange vehemently rejected any attempts to target the company or expose its users and employees to allegations of wrongdoing without substantiated proof. Binance argued that such allegations are the result of competitive disputes and reflect the company’s leadership position in both Brazil and the global cryptocurrency market.
The committee, consisting of 28 lower house representatives, also recommended that the Federal Public Prosecutor’s Office investigate the tax compliance of Binance’s local unit and Binance Capital Management, a separate arm of the company. Furthermore, the legislators suggested that Brazil’s securities regulator, known as CVM, should look into Binance’s sale of derivatives, which continued despite receiving a stop order. According to the committee’s final report, these ongoing transactions represented a repeated violation of securities market rules.
This is not the first time that Binance’s Brazil unit has come under scrutiny from CVM. In August, the securities regulator rejected a 2 million reais settlement offer proposed by local Binance executives, potentially resulting in further penalties and fines for the company.
Binance’s future in Brazil remains uncertain as the company awaits regulatory approval for its proposed acquisition of Brazilian securities brokerage Sim;paul Investimentos, announced in March 2022. The company had previously stated that the transaction would require approval from regulatory authorities, including the Central Bank of Brazil. To date, this approval has not been granted, leaving the acquisition in limbo.
The situation in Brazil reflects a broader trend as regulatory bodies in various countries worldwide intensify their scrutiny of Binance’s activities. From Australia to France and the United States, regulators are closely monitoring the world’s largest cryptocurrency exchange amid concerns over its compliance with financial and securities regulations.
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