Changpeng "CZ" Zhao, former CEO of Binance, was set to return to the UAE, where his wife and children live, but a district judge stayed this part of his bond release for now.
The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right. Joining us now with more legal analysis on Binance founder CZ staying in the US for now is Hotter law firm founder Sasha. Hotter Sasha. Welcome back to the show. Hey, thanks for having me. Great to be here. Great to have you here again. Now, Nick Lee, the foundation for us in the last segment in your um I guess legal analysis of what's going on here. How likely is it that CZ will be able to go back to the UAE? Of course, he has a family there. His team is saying he would like to go back and be with his family until February. How likely is that? Do you think it's hard to say? At first it was negotiated that he would be allowed to return home as part of this extraordinarily high $175 million bond. But the Department of Justice just filed this motion saying, you know, we're worried that he's a flight risk, there's no extradition treaty between the UAE and the United States. So, you know, imagine the embarrassment for the United States, they've got the biggest fine in financial history on the line here. And if CZ just, you know, decided changed his mind, went back to the UAE continued running. B uh you know, and the UAE might say, well, we, we're happy with the way B is running. We just extended its first um crypto license for the country. And, you know, we, we argue that you don't have power over this company because it's not a US company, you know, something like that could happen if he went back and, you know, he has cooperated every step along the way here. So it's in my opinion, unlikely Binance is big enough and has, uh, you know, they, they stand by their word typically. So they've agreed to all of this. So I don't think CZ is a particular flight risk, but I certainly see the, the concern here. What do you, was this on purpose? I mean, did they, did they lull him into a false sense of security if you will, that he could go back to the UAE or was this an oversight? I mean, it's a pretty big oversight if, if that's the case to me, it seems like a dirty trick. You know, they tell him one thing and then change the terms after he agrees to it and uh, you know, he's stuck. I didn't actually know he was married with kids until reading this, um, you know, this information, but uh, you know, it's, it's kind of unfortunate that he, he can't go back and spend the Christmas holidays with his family. But, uh, you know, maybe he could fly them to the US. It's not, it's not like he's sitting in a, in a cage in the Bahamas or something, you know, he's probably at a luxury hotel somewhere, um, in Seattle for the holidays. So, you know, it's not, it's not the worst outcome. Yeah, if you could pay 100 and $75 million bond or potentially, I, I would guess that, you know, a few, a few tickets from, uh, Emirates Air would, would be, uh, affordable. Um, but looking at this, uh, broadly and th this, uh, piece came out from Arthur Hayes, the other, uh, that was in the past few hours, uh, saying, hey, you know, Binance got the Binance is being poorly treated and, and it's look at what Goldman Sachs did. Goldman Sachs did, uh, all, all sorts of stuff with one M uh, one MB, one DV. And, and the, like how, how come he has to pay even more money than Goldman Sachs. It's because, oh, it's awful these, the, you know, uh, let me try and see if I, if I have the text there, uh, that we, we're seeing up there on the, uh, on the, uh, on the screen here. Yeah. Um, so what, what exactly is he? Yeah, he say calls it arbitrary and absurd is that necessarily the case here, or, I mean, is there, is there legitimately a reason why you would want to find, uh, uh, finance for $4 billion? I mean, I tend to agree with Arthur Hayes here. I love his writing the essay he put out late last night was phenomenal. Um, but it, it really speaks to the truth that, you know, why is the crypto industry and its biggest exchange targeted with the largest crime in earth, the largest fine in financial history. You know, we've got all these big banks that have existed for centuries and there's, oh B is bigger and better than any of those and deserves, you know, more than double almost any fine that, that we've seen like the, the Goldman Sachs issue with Malaysia, you know, they, they helped to, to steal more than $10 billion from them with, you know, the CEO of Goldman knowingly assisted the Malaysian Prime Minister Razak and you know that he was able to retire with stock options intact and Goldman was fined 2.9 billion over the scandal. And then we see, you know, in 2012 hsbc's CEO, he wasn't sent to jail for allowing his employees to knowingly physically alter cash deposit points so that the Mexican cartel could launder money. They were fined 1.9 billion. So less than half of what B was fined. And if you think of what finance actually did, they didn't knowingly assist the laundering of money, they just were blind to it. Cz couldn't see who was transacting on his platform. It took, you know, chain alys efforts and, and a lot of law enforcement efforts to figure out that, that some nefarious actors had used finance to, to launder their money. Whereas these other agencies, you know, they just clearly knew and looked, you know, looked the other way and then at the same time, you know, like, oh, go ahead. Sorry. So, so let me play devil's advocate here because one would say HS BC and Goldman, they're regulated, those are regulated entities. So, a as you said, they, they al they knew they were committing something wrong, et cetera. But the issue with, and again, I'm playing devil's advocate here, the issue with Binance was that they're unregulated, they didn't know what was going on. There are no controls in place. God knows, it could be infinitely worse on a, on a, on a set up like Binance than even a Goldman Sachs or an HS BC where at least there is some oversight that eventually could catch crimes, you know. And that's true. And finance, you know, they did, they did have, I think it was around 16% of their users were from the United States. They allowed money to move between United States people and people of Iran, which is, you know, big, no, no ofac sanctions violations. And it's something that the regulated entities in the US, like Coinbase and Gemini, they haven't been able to grow as big as Binance because they follow the rules. And if you look at finances, um, daily flows, you know, it went from 15 billion a day to 5 billion a day now that the Department of Justice and the Treasury are in there monitoring the transaction. So one has to wonder, you know, are those users just shook that the big fine is gonna make finance collapse and they're going to lose their deposits on the centralized exchange or is 10 million of criminal proceeds, you know, daily or 10 billion, you know, moving off the platform and trying to find somewhere else. We we don't really know that and now that they'll have the proper AM L controls according to the US standards, it will be more of a level playing field. But um but you know, saying that this is the worst company for the biggest fine in history and that CZ you know, did worse than these other bank CEO S for the the fine amount. I think it does show that there's an absurd injustice in the US in terms of how they determine what dollar figure to assess on these criminal cases. And you know, we still have all these politicians running around with $77 million from FTX users. They're using that money that they stole from these FTX users to to run their political campaigns. And you know, I think the whole thing just shows how threatened the powers that be are by the crypto industry, the treatment of CZ and Binance shows resistance against decentralization and the Blockchain revolution which you know, it ultimately challenges the state powers, Sasha. You know the DOJ is saying that Binance failed to report hundreds of thousands of suspicious transactions and that's really what they're trying to um address here in, in these charges. What do you think this $4.3 billion fine? What message do you think they're sending to the rest of the industry? Particularly the firms that operate in the US that you just mentioned? Well, I think, you know, um I think Blackrock has a lot of leverage over the Department of Justice and the Treasury Department and these other giant asset managers that are in line for an ETF approval. Um These are the companies that are buying up the debt from the US Treasury and without their purchasing of this US debt, uh the US would be in a big trouble. We'd have much higher interest rates. So I think they have a bit of leverage here to say, hey, we're waiting for this TF approval. The SEC has cited Binance and tether kind of as the two major things that are, that are causing manipulation of the price of Bitcoin. And you know, now Binance is taken care of. Perhaps there needs to be some, you know, in, in, in Blackrock's mind. Anyway, in the S ECs mind, there needs to be some um remedy with tether. And interestingly on the same day as the B announcement, Tether put out a blog saying that um that the they've on boarded the US secret service into their platform and they're planning to do the same with the Department of Justice. So it looks like something's happening with Tether at the same time. And you know, keep in mind, Blackrock has, you know, a distinct competitive, uh you know, thing going on with tether because Blackrock manages the reserves for Circle and Circle is, you know, declining market cap over the last year and a half. And then we saw with this b um you know, take down it also involved the, the, the dismantling of the Binance Stablecoin, which had a $23 billion market cap a few months ago. And now it's got a $1.7 billion market cap and it's been ultimately unwound without any market disruption. So they might be looking at it and thinking they can do the same thing with tether. And then, you know, then everything's, it's a win, win for everyone. You know, the the Department of Treasury can say, hey, we, we've taken care of the, you know, terrorism and we can use this terrorism angle to add further restrictions on the crypto industry. The sec can approve an ETF saying that, you know, now we've got the more oversight over these two big offshore exchanges. Tether and Binance and CZ gets away here with the largest financial fine in history. But it's still a slap on the wrist because he's still the majority shareholder of finance. He can even come back as the CEO in three years. And, um, you know, he's gonna do well through the next bull market. He's not going to spend the rest of his life in jail. So, you know, everyone kind of get through this. Mhm. It's not like terrorism is a big issue right now. Well, I mean, it's not like it's not, I mean, it's not like, you know, we need to worry about terrorists. I don't know, taking, trying to take over a country blowing up people shooting people and then, you know, financing it somehow. Yeah. But look who's financing it? I mean, we've sent over 100 billion to the, to Ukraine and the, the Pentagon just failed its last audit. It's got 3.8 trillion of missing military equipment, which is actually five times the whole Bitcoin market cap. So, you know, if they're really worried about terrorist financing, they're going to look into what happened to that weapons rather and what the money to Ukraine is being spent on rather than that. No, no. What, what 11 could suspect that the issue with tether and, and its lack of, uh, and it's consistent lack of transparency with the, with where its assets are going how it issues its, it's, uh, how it issues its, uh, tether in general and, um, it sort of, uh, blatant, uh, thumbing its nose at, at the regulators from time to time, uh, might get under people's skin. Uh, especially when, I don't know, things that are happening that are killing tens of thousands of people. It's, it's, it's, it's theoretical. Right? Doesn't, doesn't actually happen in the real world. Well, it's, I think, I think Reform of Tether is, is short on the heels of this B action. All right, Sasha, we are going to leave it there. Thanks so much for joining us this morning. Always a pleasure having you on. Thank you. That was Hotter law firm founder Sasha. Hotter.