US heavy hand against crypto sector continues to knock down heavyweights

The heavy hand that the United States authorities have been applying for months against the cryptocurrency sector last Tuesday brought down one more of its heavyweights, the head of the largest global exchange platform, Binance, Changpeng Zhao.

Zhao, known as “CZ,” resigned that day as part of an agreement to resolve accusations of money laundering at the company, which will have to pay fines of $4.3 billion but can continue operations, although without the involvement of its founder.

This was announced at a press conference by the Attorney General, Merrick Garland, the Secretary of the Treasury, Janet Yellen, and the president of the Commodity Futures Trading Commission, Rostin Behnam, figures who underlined the importance of this action for the U.S. government.

The fall of CZ, one of the most influential figures in the crypto world, is part of a year of scrutiny by the Securities and Exchange Commission (SEC), whose president, Gary Gensler, set out to bring order to this ‘Far West’ after the collapse of the FTX platform in November 2022.

CZ had a lot to do with that collapse of FTX: after expressing concern about the solvency of that competing company and announcing the sale of its stake, panic arose among investors, who came to withdraw their money, giving rise to a hole in US $8 billion and, eventually, bankruptcy.

A long list of crypto companies charged by the SEC

The list of companies that enjoyed strong growth thanks to regulatory laxity and that are now charged by the SEC for non-compliance with the laws is increasingly longer: FTX was joined by Kraken, Coinbase, Gemini, Genesis and Terraform, among others. .

In most cases, the SEC argues that the cryptoassets managed by these platforms are in the same category as securities and titles regulated by federal law and that they should be registered as such, something that they refute and have generally rejected.

However, the SEC, which accused Binance of the same thing in June, is not part of today’s agreement.

In today’s case, the authorities put the spotlight on Binance for its alleged commission of money laundering crimes using its presence in countries such as Iran and Russia, subject to sanctions by the US Government, according to documents from the accusation.

“Let me be clear: we are sending a message to the virtual currency sector. Today and in the future, if exchanges and financial technology companies want the tremendous benefit of being part of the American financial system and serving American customers, they must follow the rules,” said Treasury Secretary Janet Yellen.

Laxity is over

The news finds the crypto world still digesting the fall of the founder and former boss of FTX, Sam Bankman-Fried, who is awaiting a prison sentence after being found guilty this month of seven fraud offenses following a criminal trial, and who has another trial pending , promoted by the SEC.

Regulators often emphasize that crypto platforms and other companies in the sector promote investments that are not protected or supervised, leaving investors, usually retail and non-experts, in a vulnerable position.

That happened with the collapse of the TerraUSD and Luna cryptoassets, in May 2022, which lost practically all their value in five days, in what the SEC considered a “pump and dump” scheme orchestrated for years by its broadcast platform, Terraform, and its executive, Do Kwon.

The heavy hand of the authorities has been felt even by several celebrities who rode the crest of the wave by advertising digital assets to millions of followers without informing that they had been paid to do so, such as Kim Kardashian, fined US$1.1 million.

On the other hand, the actors in the crypto world themselves are collaborating to stop crime and today, Tuesday, the Department of Justice revealed the dismantling of a scam scheme through internet romance and the seizure of US$ 9 million in the stable cryptocurrency Tether with help from your operator.