Who are the “leakers” behind the accusations brought by multiple regulatory agencies against Binance?

Author: Nancy, BlockingNews

Despite the recent panic caused by the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Binance and CEO Changpeng Zhao, the fact that the lawsuit has entered the mediation stage may mean that there is a greater chance of a settlement being reached between the two sides. In recent years, Binance has faced regulatory pressure from multiple U.S. regulatory agencies, many of whom have received “evidence” from Binance’s internal executives and related personnel. This article by BlockingNews will take a look at the “whistleblowers” behind Binance’s regulatory woes.

Catherine Coley

Catherine Coley was the first CEO of Binance.US, serving from 2019 to 2021. Prior to this, Catherine Coley had no CEO experience. According to her LinkedIn profile, she was responsible for XRP institutional liquidity at Ripple and worked in institutional foreign exchange markets for banking giant Morgan Stanley in Hong Kong and London, as well as serving as a foreign exchange advisor at Silicon Valley Bank.

Catherine Coley is one of the few young female leaders in large cryptocurrency exchanges and was listed on Forbes’ 40 under 40 list in 2020. In May 2021, Catherine Coley left Binance.US, and neither she nor Binance officials mentioned the reason for her departure. This executive disappeared from public view after her departure, and her tweets were no longer updated. Prior to this, she had posted thousands of tweets praising cryptocurrency technology and was very active. Currently, Catherine Coley’s LinkedIn profile has not been updated, and her position is still described as “former CEO of Binance.US.” According to The Block’s previous reports, insiders revealed that CZ had hoped that Coley would stay at Binance after hiring Brian Brooks (the next CEO), but she no longer wanted to stay, and Brian Brooks, who is known for his shrewdness, did not encourage her to do so.

According to Catherine Coley’s testimony provided to the SEC in January 2022, it mainly involves the relationship between Binance and Binance.US; the lawsuit documents show that Changpeng Zhao was involved in Catherine Coley’s recruitment, but she quickly became disappointed with the lack of independence of Binance.US after joining the company. She said that Binance and Binance.US may not be completely independent because there are four service agreements between the two companies, including the main service agreement, wallet custody agreement, software license agreement, and trademark agreement. In particular, the wallet agreement, “I wanted at least the U.S. involved in the wallet and custody agreement, so we could control the token custody. I want the ability to store data and interact with raw data in real time.”

In addition to the 2022 testimony, the SEC cited Coley’s internal communications in the lawsuit, including her mention of Binance.US’s efforts to gain more independence through the “1776 plan” and evidence of interactions regarding false trades.

In March of this year, Catherine Coley hired former CFTC prosecutor James McDonald to represent her as a lawyer in response to the U.S. government’s investigation into Binance.

Brian Brooks

Brian Brooks became the CEO of Binance.US in May 2021, but parted ways with Binance.US after only four months, citing “differences in strategic direction.” At this time, Binance.US’s plan to raise $100 million in financing and go public also fell through due to regulatory issues. Prior to this, Brian Brooks served as Coinbase’s chief compliance officer and later served as acting comptroller of the currency for several months after Trump’s defeat, strongly supporting cryptocurrency during his tenure. He is currently the CEO of cryptocurrency mining company Bitfury.

In the SEC’s testimony, Brian Brooks also revealed the reason for his sudden departure, “I realized that I wasn’t actually running this company (Binance.US), and I don’t think the mission I was entrusted with when I signed up was the actual mission, and once I realized that, I resigned.”

At the same time, Brian Brook also disclosed to the SEC that Binance.US has a team of about 50 engineers based in Shanghai and operates under an entity called “Boran,” some of whom are paid in BNB (Binance’s platform token), which is actually Binance.US’s unit in China. Binance.US received an initial investment of $10 million from CZ when it was launched, and the existence of these funds is a “problem.” In addition, he pointed out that Binance.US uses an authorized matching engine and does not directly control the platform through technology.

Samuel Lin and Alvin

Samuel Lin was the former compliance officer of Binance, and Alvin was the former business development officer. The SEC’s lawsuit includes multiple internal conversations between the two, and based on this “evidence,” Samuel Lin does not appear to have “actively” leaked information, but rather engaged in casual conversations between friends. According to LinkedIn, Alvin Kan joined Binance as a data analytics manager in June 2021 and was promoted to ecosystem growth manager six months later before officially leaving in April 2023.

In multiple screenshots, Samuel Lin stated that BNB’s strategy is to stay alive for more than two years and then exit, and that its price could go to zero at any time. He advised Alvin to sell half of his company’s BNB rewards for USDT, and called holding 100% of BNB foolish. He also believed that Binance.US was operating an unlicensed securities exchange in the United States, with risks outweighing returns. At the time, CFO Wei Zhou asked him to be the CCO (Chief Compliance Officer) and handle signing matters, but he declined. If he were CCO, he would be uncomfortable signing compliance matters with OFAC (Office of Foreign Assets Control). In addition, Samuel Lin also said that Binance cannot be clean, no possible evidence can be found, and that CZ even taught employees how to avoid procedures.

Meanwhile, Alvin referred to BNB’s potential to drop very low, even lower than HUOBI, and called holding BNB very brave. At the same time, Alvin flirtatiously referred to Binance’s compliance situation as the Titanic, slowly sinking.

In response, Zhao Changpeng also responded in an internal Binance letter, stating that Binance will not check employee chat records, but if they are unhappy with working at Binance (or any company), they should talk to their manager and seriously consider their career choices. Don’t waste energy and life on something you don’t like, because you won’t do it well. He also bluntly stated that the SEC’s use of employee chat as evidence is “ridiculous.”

Harry Zhou

Harry Zhou is a serial entrepreneur who graduated from Harvard Law School and Dickinson College with a degree in Economics and Computer Science, and has worked at a law firm. He has a deep understanding of the application of AML and CTF laws and regulations in the digital currency field. Harry Zhou is also a co-founder of the US OTC trading platform Koi Trading, and has received $3 million in funding from Binance’s venture capital department.

In 2022, Forbes published an article stating that Binance’s internal use of the “Tai Chi” plan is carefully planned to evade local compliance and regulatory policies in the United States. The document includes targets, proposed company structure, participation in regulatory programs, and long-term licensing plans. It was coordinated by former Binance employee Harry Zhou, with the goal of minimizing the impact of US regulatory agencies such as the SEC, CFTC, and NYDFS, and even proposing that Binance join the US Department of Homeland Security’s (DHS) cornerstone program in order to identify regulatory weaknesses. Binance denies the allegations against this document and states that Harry Zhou has never worked for Binance. According to BlockingNews, Harry Zhou did not work at Binance, but claimed to be familiar with US regulations, so he provided relevant consulting services to Binance and other exchanges. In this year’s SEC lawsuit against Binance, the “Tai Chi” plan was mentioned again as evidence of Binance’s evasion of US regulation.

Meanwhile, in March of this year, according to The Wall Street Journal, former head of Binance’s Venture Capital Department, Ella Zhang, and Harry Zhou met with current SEC Chairman Gary Gensler at a meeting in October 2018. At the time, Harry Zhou wrote in a chat message, “I notice that although Gensler refuses to serve as an advisor, he is very generous in sharing licensing strategies.” However, lawyers from Binance’s two law firms, Gibson Dunn and Latham & Watkins, claim that Gary Gensler volunteered to serve as an advisor to Binance’s parent company in 2019.

Overall, these “witnesses” are key figures in the various accusations against Binance, but most of them have not been able to provide overwhelming evidence, and many have obvious personal subjective language analysis and inference.

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