On March 27, 2023, the U.S. Commodity Futures Trading Commission (CFTC) filed a civil lawsuit against the world’s largest cryptocurrency exchange Binance and its CEO Changpeng Zhao for violating regulations regarding derivatives. Thus, all eyes are on Binance and its managers. Meet He Yi, Binance co-founder and former ‘Bitcoin First Lady’ of China.
Binance co-founder ‘Bitcoin First Lady’
cryptocoin.comAs you follow, the lawsuit claims that Binance allows US residents to trade derivatives without registering with the CFTC and does not report trades. It also seeks fines, recovery of unjustified gains, and permanent injunction against further violations. Binance was founded in Shanghai, China in 2017 and currently has offices in Singapore. It also opened an office in San Francisco in 2019. Binance says it does not have a separate headquarters. The stock market has been embroiled in controversies and legal issues over the past few years, and this latest lawsuit is the latest in a series of challenges for the company.
Changpeng Zhao, also known as CZ, has been the public face of Binance since its inception. She has consistently attracted media attention. However, his girlfriend He Yi has only occasionally appeared in the media. Yi is a prominent figure in the cryptocurrency industry in China and is known as the ‘Bitcoin First Lady’. He Yi was born in October 1986 in Sichuan Province, China. She graduated in Psychology from the University of the Chinese Academy of Sciences, one of the best academic institutions for natural sciences in China. After graduating from university, she worked as a psychological counselor and university lecturer. He later became the host of a travel satellite channel, where he hosted TV programs such as ‘beautiful places’, ‘everywhere far away’ and ‘the world is beautiful’.
In 2013, He Yi joined OKCoin as a co-founder. OKCoin’s co-founders were Xu Mingxing, Changpeng Zhao and Yi. OKCoin is now known as OKX. Yi earned the nickname ‘Bitcoin First Lady’ in China during her time at OKCoin. “It is my duty to spread Bitcoin to the masses,” Yi said in an interview with Chinese media outlet Phoenix. At the end of 2015, Yi left OKCoin to join Isha Technology as vice president. Isha Technology was a major technology company worth about 20 billion yuan ($3 billion) at the time. He was responsible for management and product markets at Isha Technology.
Founding of Binance exchange
He Yi founded Binance with Changpeng Zhao in August 2017 and currently serves as the CMO. Binance listed 18 tokens in the same month and started serving users in more than 180 countries. On September 1, 2017, Binance received an angel investment of $10 million from China’s Fancheng Capital and Blackhole Capital. Since then, Binance has grown rapidly. In 2019, Yi’s WeChat personal account was blocked after Chinese authorities announced that he was banning cryptocurrencies. Binance Exchange’s official WeChat account and channel has also been shut down. Tencent, which operates WeChat at the time, suspended many cryptocurrency-related channels.
He Yi resurfaced when he took over as CEO of Binance Labs in August 2022. Binance Labs is a venture capital (VC) firm that manages a total of $7.5 billion in assets affiliated with Binance. It has reportedly recorded a return on investment of around 2,100% since its launch in 2018. Led by He Yi, Binance Labs has the ability to simultaneously manage the project from investment and incubation to listing. This raises the issue of conflict of interest between the two parties.
Focus turns to Binance
In mid-December 2022, messages emerged that Yi was communicating with internal employees. Back then, the exchange had been publishing proof of reserve for a long time. Binance was facing scrutiny over whether its users were holding enough of their assets. In response to the allegations, He Yi posted a statement on his official WeChat account denying the accusations and stating that the exchange always maintains sufficient reserves. He also promised to work with regulators to ensure the exchange complies with all applicable laws and regulations.
Binance CEO CZ accused of “Wash Trading”
The CFTC’s recent lawsuit against Binance and its CEO, Changpeng Zhao, has added to the company’s woes. The regulator accused Binance of violating derivatives regulations and claimed that the exchange allowed US customers to trade cryptocurrency derivatives without registering with the agency. The CFTC also accused Zhao of engaging in illegal “Wash Trading,” a practice in which a trader simultaneously buys and sells the same asset to create the illusion of trading activity.
Binance denied the allegations and promised to defend itself against the lawsuit. In a statement posted on its website, the company said it was “disappointed” by the CFTC’s actions and has always complied with all applicable laws and regulations. The lawsuit is the final blow to Binance’s reputation, which has been tarnished by a series of regulatory challenges and conflicts. In recent months, the exchange has come under scrutiny from regulators in countries such as the UK, Japan and Thailand for allegedly operating without proper licenses and failing to comply with anti-money laundering rules.
Increasing regulatory pressures and Binance’s compliance efforts
Binance has responded to regulatory challenges by announcing a series of measures aimed at improving compliance practices. The exchange has committed to increase its regulatory compliance team and implement new policies and procedures to ensure it complies with all applicable laws and regulations. The company also announced plans to launch a new platform specifically for US customers, which will be entirely regulated by US regulators. Expected to launch later this year, the platform will offer trading in cryptocurrencies and other digital assets, but will be subject to US regulations and supervision.
The CFTC’s lawsuit against Binance may continue
Despite the challenges, Binance remains the world’s largest cryptocurrency exchange by trading volume. The company has a market capitalization of over $30 billion and is considered one of the most influential players in the cryptocurrency industry. However, regulatory challenges faced by Binance and other cryptocurrency exchanges highlight the industry’s need for greater oversight and regulation. While cryptocurrencies offer many potential benefits, such as increased financial inclusion and greater efficiency in payments and remittances, they also pose significant risks, including money laundering, fraud and market manipulation.
As the cryptocurrency industry continues to evolve and mature, it will be important for regulators and industry players to work together to ensure the industry operates safely and responsibly. The CFTC’s lawsuit against Binance is the latest example of the need for greater oversight and regulation in the cryptocurrency industry, and we are likely to see more such actions in the future as regulators seek to protect consumers and preserve the integrity of financial markets.
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