Pressure from the US Justice Department, CFTC and SEC has led CZ and Binance to hire a team of white-collar lawyers
Binance CEO Changpeng Zhao (CZ) is lawyering up as the US intensifies its scrutiny of the crypto industry.
According to the New York Times, Zhao has hired law firm Latham & Watkins to represent him personally.
Court documents filed on Monday show that lawyers from top law firms are representing both Zhao and Binance. Binance itself is being represented by half a dozen Gibson Dunn lawyers.
The world's largest crypto exchange is currently facing a lawsuit from the Commodity Futures Trading Commission (CFTC), which alleges that from at least July 2019 until the present, the largest crypto exchange "offered and executed commodity derivatives transactions on behalf of US persons" in violation of laws.
Moscowitz Law Firm and Boies Schiller Flexner filed the lawsuit against Binance, Zhao, Miami Heat forward Jimmy Butler, YouTuber Graham Stephan and crypto personality Ben Armstrong, known as "Bitboy."
Binance is accused of listing unregistered securities as cryptocurrencies, including BNB, and paying social media influencers to promote them. The exchange was investigated for over a year before the lawsuit was filed.
Read more: CFTC Sues, Says Compliance Efforts at Binance a Sham
After the CFTC lawsuit, investors pulled US$1.6 billion in cryptocurrencies from Binance, according to blockchain data tracker Nansen.
According to Martin Lee, a research analyst at Nansen, the outflows were greater than typical but still lower by about half than on December 13, when investors withdrew US$3 billion due to concerns over Binance's liquidity.
Read more: US$1.6 Billion Pulled From Binance After US Watchdog's Bite
Binance's stablecoin BUSD has also been at the mercy of US regulators. Towards the end of March, BUSD' held a market cap of over $8 billion. Since then, its market cap has fallen around 20% to $6.4 billion.
Its turmoil began when regulator pressure fell on BUSD issuer Paxos, which ultimately ended its relationship with Binance.
“The market has evolved and the Binance relationship no longer aligns with our current strategic priorities,” Charles Cascarilla, Paxos CEO, said in an internal email.
Cascarilla claimed the decision was unrelated to pressure from the New York Department of Financial Services (NYDFS) and the SEC, which have recently pried into Paxos's relationship with the exchange. Paxos had been ordered to stop issuing BUSD due to "unresolved issues."
Read more: BUSD Market Cap is Dwindling – Here's Why
The Department of Justice is also investigating Binance's conduct and the Securities and Exchange Commission (SEC) is looking into the firm's business practices.
Even outside America, Binance is facing pressure. Earlier this month, Dubai's Virtual Assets Regulatory Authority (VARA) asked Binance to provide more information about its company structure, governance and auditing.
Read more: Dubai Requests Binance Info, Finally Tightens Crypto Regulation
Most recently, Binance pulled out of its Voyager Digital acquisition following months of drama involving the SEC and judges.
In a tweet, Binance cited "the hostile and uncertain regulatory climate in the United States" for its withdrawal, pointing towards "an unpredictable operating environment impacting the entire American business community."
Read more: After All the Drama, Binance Cancels Voyager Deal
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