‘They missed the bad guy, and now they’re punishing all the remaining good guys:’ One week before SEC lawsuit, Binance CEO had words for regulators

News | June 11, 2023 By:

Less than a week before his company was sued by the U.S. Securities and Exchange Commission (SEC) Binance CEO Changpeng Zhao criticized regulators for failing to stop the collapse and bankruptcy of FTX, while aggressively pursuing what he called the “good guys” in cryptocurrency.

“They missed the bad guy, and now they’re punishing all the remaining good guys – and the bad guys, together in crypto,” he told ‘Bankless’ podcast host David Hoffman and Ryan Sean Adams. ”Now they’re just slaughtering everybody in crypto.”

The Canadian Zhao, known in the industry as “CZ,” said U.S. lawmakers and regulators deferred to FTX CEO Sam Bankman-Fried in part because he was young, American, and attended a prestigious university, Massachusetts Institute of Technology (MIT).

“(FTX) took customer funds and used that to trade, to try to make money, and they actually did a poor job at that. Then they lost money to the point where they lost all their customers’ money,” Zhao said, “Throughout that whole time, [Bankman-Fried] was lying about it. He didn’t tell the customers he was doing this.”

Zhao said FTX’s implosion has led to an overreaction by U.S. regulators.

“The situation was made worse by how public (Bankman-Fried) was, how much time he spent in Washington, D.C., and how much time he spent talking to Senators,” Zhao said. “All of that actually backfires when people discover this guy’s a fraud., and their trust is betrayed. They turn around, they become much harder on crypto.”

The November collapse of FTX resulted in billions of missing funds owed to its creditors, NerdWallet reported. The collapse also led to the demise of multiple other crypto companies that had exposure to FTX and shook confidence in the industry.

Bankman-Fried donated approximately $40 million during the 2022 election cycle, primarily to Democratic politicians, but also to some Republicans, CBS reported. His donations included $27 million to the Protect Our Future PAC, which spent more than $24 million supporting 19 different Democratic candidates for the U.S. House of Representatives.

Bankman-Fried had a relationship with Gary Genser, the chair of the U.S. Securities and Exchange Commission (SEC), and met with him multiple times, Coinnounce reported.

On June 5 and 6, the SEC filed lawsuits against both Binance and Coinbase. The SEC is alleging that Coinbase should have registered as an exchange with the SEC and accusing Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, rather than restricting them to its U.S.-based platform.