Binance sues Forbes
Cryptocurrencies,  Media,  Regulation

Binance sues Forbes, journalists over allegations of deceiving U.S. regulators

The largest cryptocurrency exchange took issue with an article saying Binance.US was set up to enable it to avoid American anti-money-laundering laws

Binance has sued Forbes and two well-known crypto writers for defamation over an Oct. 29 story claiming the largest crypto currency exchange had created an “elaborate scheme” to “intentionally deceive” U.S. regulators.

The story in question, “Leaked ‘Tai Chi’ Document Reveals Binance’s Elaborate Scheme To Evade Bitcoin Regulators,” claimed that Binance set up American crypto exchange Binance.US as a way to “intentionally deceive regulators and surreptitiously profit from crypto investors in the United States.”

In response, Binance CEO Changpeng “CZ” Zhao on Nov. 18 against Forbes Media and writers Michael del Castillo and Jason Brett in the U.S. District Court for the District of New Jersey seeking unspecified compensatory and punitive damages “in the millions of dollars.”

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The Forbes story and Binance’s subsequent  lawsuit comes on the heels of the indictment of four executives of crypto derivatives exchange BitMEX by the U.S. Department of Justice, which alleged that they violated Bank Secrecy Act.

The accusation

The story revolved around a 2018 slideshow Forbes alleges was created by Harry Zhou, who Forbes describes as a Binance employee, and seen by “senior Binance executives.” 

The article called the Tai Chi slideshow “a strategic plan to execute a bait and switch.”

Forbes reported that Binance.US—which has been aggressive in cooperating with regulators and following all legal requirements for operating an exchange in the U.S.—was actually set up to “distract regulators with feigned interest in compliance, measures would be put in place to move revenue in the form of licensing fees and more to the parent company, Binance. All the while, potential customers would be taught how to evade geographic restrictions while technological work-arounds were put in place.”

In the suit, Binance said: “The person who Forbes claims created it, Harry Zhou, is not and never was an employee of Binance. Binance has not implemented any of the suggestions in the proposal, which was created by a third party. The Story falsely states that Binance both created and implemented the plan.”

The suit lists 19 comments it claims are false, misleading, and defamatory, including allegations that Binance.US was set up to avoid anti-money-laundering laws and “funnel” revenue back to Binance, allowing it to “surreptitiously profit from crypto investors in the United States.”

The suit cited claims by Forbes that the  creation of Binance.US “reminiscent of Amway-style multi-level marketing organizations” and suggested that the FBI and IRS were investigating. This included a report that an FBI agent questioned by the reporters first denied there was an investigation, but later issued a formal “no comment.”

Binance argued that the three defendants “proceeded to publish the false, misleading and defamatory statements in the Story, knowing that they would cause substantial harm to Binance.”

A spokesperson for Binance declined to comment further. Forbes Chief Communications Officer Matthew Hutchison told Modern Consensus via email, “We stand by our reporting.”

Modern Consensus did not receive a reply to a request for comment from Binance.US by press time.

Familiar ground

This is not the first time Binance’s CEO has threatened industry media outlets. 

As Modern Consensus reported a year ago, Zhao battled with cryptocurrency news site The Block over a Nov. 21 story—later partially retracted—claiming that a Binance office in Shanghai was raided by police. 

In the four-day Twitter war that followed, Zhao accused The Block of peddling FUD—fear, uncertainty, and doubt—as well as “fake news.”

Aside from cancelling a potentially lucrative partnership deal bringing The Block’s reporting to Binance’s customers, Zhao called for the creation of an industry fund to fight stories the members consider to be FUD. Tron CEO Justin Sun chimed in with an offer to donate 100 BTC to the fund, which Zhao matched. The fund has apparently not come to fruition.

But the threat led The Block’s founder and CEO Mike Dudas issue a (now apparently unavailable) tweet saying, “Two of the wealthiest men in cryptocurrency plan to raise a ‘FUD fighting fund’ worth more than $1 million, presumably to wield as an implicit threat against journalists who report facts that run contrary to their business interests.”

Zhao later threatened to sue on Twitter.  

Updated Nov. 18 to add Binance’s and Forbes’ comments.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.