After the fall of FTX, it seemed that the world of cryptocurrency had almost entirely passed into the hands of Binance - however, after a year, the world's largest cryptocurrency exchange also found itself in trouble.
The Binance empire is "trembling" under the threat of forced measures from official US institutions and losing its top managers - in the last 3 months alone, at least 1500 employees have left because the company started cutting expenses and preparing for a business decline.
Although Binance is still a major player in the crypto industry, according to Kaiko, the exchange now processes about half of all cryptocurrency buy/sell orders - compared to 70% earlier this year.
The decline of the largest cryptocurrency exchange is fraught with huge consequences for the industry - and while smaller companies may take its place, in the short term, market liquidity may evaporate, leading to a sharp decline in token value.
One institutional trader commented to The Wall Street Journal that his company conducted emergency training to quickly withdraw their assets from Binance in case of a crash.
And He, the co-founder of Binance and Chief Marketing Officer, promised that the company would overcome its problems, addressing employees last month:
"Every battle is a 'win or die' situation, and the only thing that can defeat us is ourselves. We have won countless times, and we need to do it this time as well."
Binance often invests in crypto and other projects, including X, formerly known as Twitter. The company's co-founder Changpeng Zhao - or CZ, as known by 8.6 million X followers - is the most famous figure in the world of cryptocurrency.
"You simply cannot quantify what will happen to the industry if Binance disappears, considering it has been responsible for a huge amount of innovation and growth," said Anthony Georgiades, general partner at Innovating Capital.
The US Department of Justice has conducted a years-long investigation that, according to sources, could lead to criminal charges against Binance and Zhao, and billions of dollars in fines.
Binance is also facing a lawsuit from the Securities and Exchange Commission, alleging that the company and Zhao operated illegally in the US and abused client funds. The cryptocurrency exchange acknowledged past mistakes but stated that customer funds are secure, and it is working to comply with regulatory requirements.
"We have tirelessly worked not only to learn from past lessons, but also continued to invest in teams and systems that protect users," said a representative of the cryptocurrency exchange.
Binance was launched in China in 2017, although it claims to have no headquarters and employees are scattered around the world. The global exchange's website is available to traders almost everywhere, but the situation is changing, especially in several European countries.
Activity on the local US exchange Binance.US has almost disappeared, and the CEO, Chief Legal Officer, and Chief Risk Officer recently left the company. A few days before the CEO of Binance.US, Brian Shroder, was fired, he stated that revenue on the exchange had fallen by 70% since the beginning of the year.
Shroder told employees that Zhao must "resolve regulatory issues, transfer his .US shares to a blind trust, or sell his shares" for the American platform to continue to grow. According to him, these steps will allow the company to restore relationships with banks and obtain a license. Zhao is the majority owner of Binance.US and the global exchange.
According to people familiar with the situation, Binance and the Department of Justice have been negotiating for months, and inside the cryptocurrency exchange, discussions were held on whether Zhao should resign.
According to WSJ, the turmoil in the company has also hit the morale of employees.
"Some laid-off employees were informed 0 days in advance of their dismissal. They simply could not log in. Is this a respectful attitude towards them? Do they have 2 weeks notice of dismissal?" - one anonymous employee asked Zhao in the general chat (nine others liked the message, but the question remained unanswered).
The Department of Justice also initiated an investigation into Binance and possible violations of US sanctions against Russia and questioned the company's chief compliance specialist, Noah Perlman. Pressure from the agency was one of the reasons Zhao decided to wind down the business in Russia - once one of its key markets.
Binance reached an agreement to sell its entire Russian business to the crypto exchange CommEX, and confidently stated that they do not belong to Binance, but refused to disclose the names of the owners, as they "do not want publicity."
Zhao remained publicly defiant:
"We are one community," he wrote on X the day the leaders from Russia left the company. "Keep building!"
But sitting in his home in the UAE (with no extradition treaty with the US), Zhao was attracting new lawyers to handle the Department of Justice case, as people familiar with the situation claim.
Source: The Wall Street Journal
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