Week In Crypto: Former Binance CEO Must Surrender Canadian Passport

March 15, 2024
US courts move to ensure that Changpeng Zhao does not abscond before sentencing, Crypto.com is hit by a €2.85m fine in the Netherlands, and Coinbase is forced to delete an embarrassing page from its website.

US courts move to ensure that Changpeng Zhao does not abscond before sentencing, Crypto.com is hit by a €2.85m fine in the Netherlands, and Coinbase is forced to delete an embarrassing page from its website.

A US District Court judge has ordered former Binance CEO Changpeng Zhao to surrender his Canadian passport and remain in the US until sentencing.

Responding to a motion to modify Zhao’s bond conditions, judge Richard Jones ordered Zhao to hand over his Canadian passport to a “third-party custodian”.

“The third-party custodian must retain control over that Canadian passport and must accompany defendant on any travel that requires identification documents,” Jones wrote.

In addition, Zhao must surrender all other “current and expired passports and travel documents” to his lawyers, who may only return them following a court authorisation.

Zhao is also prohibited from applying for new passports or travel documents in any country without permission from the courts.

Born in Jiangsu, China, Zhao moved to Canada at age 12. Now 47, the crypto billionaire holds a Canadian passport and Emirati passport, after he was granted UAE citizenship while taking up residence there.

Previously, as covered by Vixio, US courts had prevented Zhao from returning to the UAE on flight risk grounds, due to the absence of an extradition treaty between the two countries.

Based on federal guidelines, Zhao is likely to be imprisoned for 18 months when he returns to court for his sentencing hearing on April 30.

Zhao pleads guilty to money laundering

In November last year, Zhao pleaded guilty to one count of failure to maintain an effective anti-money laundering (AML) programme, as required by money service businesses under the Bank Secrecy Act (BSA).

Since launching Binance in 2017, the US Department of Justice (DOJ) alleged that Zhao and his chief compliance officer, Samuel Lim, had committed “wilful violations” of the BSA.

These violations included failures to implement know your customer (KYC) checks and failures to monitor transactions and file suspicious activity reports (SARs).

Zhao also admitted to failing to prevent users in sanctioned jurisdictions from using Binance.

In communications obtained by the DOJ, Zhao had told colleagues that it is “better to ask for forgiveness than permission” from regulators, and had described his compliance strategy as one of operating in a “grey zone”.

Crypto.com rejects €2.85m fine in Netherlands

Foris DAX MT, parent company of Crypto.com, has said it is currently appealing against a €2.85m fine that was issued in the Netherlands for failing to register.

This week, De Nederlandsche Bank (DNB) published details of an administrative fine that was issued against the company in October last year.

According to the DNB, Crypto.com had offered crypto services in the Netherlands without registration from May 21, 2020 until at least November 8, 2022.

One day before this period, on May 20, 2020, the DNB introduced a new registration regime for crypto service providers.

Under the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft), crypto service providers must register with the DNB prior to offering their services to customers in the Netherlands.

The DNB said that failure to register under the Wwft is punishable by a category 3 fine of between €2m and €4m.

Crypto.com’s non-compliance was aggravated, the regulator added, due to its significant acquisition of customers and its non-payment of supervisory fees during the offending period.

In a statement shared with Vixio, a Crypto.com spokesperson said the fine relates to a “past and rectified incident”, and does not affect its current operations in the Netherlands.

“We are disappointed and disagree with DNB’s decision to fine Foris DAX MT and are actively appealing this decision,” the spokesperson said.

“Moreover, we have already addressed the concerns raised in a timely and transparent manner and received regulatory approval from DNB as a crypto service provider in July last year.”

The DNB’s action is similar to the €3.3m fine imposed on Coinbase in January 2023.

As covered by Vixio, the DNB found that Coinbase had offered services in the Netherlands without registration after May 20, 2020.

Coinbase’s fine was higher due to its larger customer base, although the fine was reduced by 5 percent as Coinbase had “always intended” to register, and finally did so in September 2022.

Coinbase quietly removes Elizabeth Warren-themed meme coin page

In other Coinbase news, this week the United States’ largest crypto exchange was forced to remove an informational page on its website related to an Elizabeth Warren meme coin.

On Wednesday (March 13), an unknown person created the "elizabath whoren" coin in honour of the crypto-sceptic US senator, and launched it on the Solana blockchain.

Once launched, it triggered the creation of an automated page on the Coinbase website, which provides investors with further information.

“How to buy elizabath whoren in United States (US) WHOREN,” the page was headlined, with ‘WHOREN’ standing for the coin’s ticker symbol.

The page went on to state that WHOREN is not currently available on Coinbase, but could be in future, so make sure to check for updates.

“Some cryptocurrencies are harder to obtain than others,” it said. “elizabath whoren is one of them.”

Source: Joe Weisenthal, X.com

Speaking to Vixio, a Coinbase spokesperson said the company does not vet the informational pages before they appear on the website.

“These pages are automatically generated based on tokens that have been created by third parties,” she said.

“They are informational only, do not endorse any asset, and do not indicate that the assets are available for trading on Coinbase.”

WHOREN is not the first coin to cause offence on the pages of the Coinbase website.

Other tokens launched by third parties, which also triggered automatic 'How to buy' pages on the website, include "Shitcoin", the "Poopsicle" coin and the "I will poop it NFT" coin.

All three of these coins (and others like them) appeared on the Coinbase website bearing the ticker symbols: "SHIT" and "POOP".



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