A Brazilian congressional committee has recommended that local law enforcement prosecute Binance CEO Changpeng "CZ" Zhao and three other Binance executives as a result of an investigation into a Brazilian financial pyramid scheme. The committee issued a 500-page final report on October 10, which accuses Zhao, along with local Binance executives Daniel Mangabeira, Guilherme Haddad Nazar, and Thiago Carvalho, of fraudulent management practices, operating without proper authorization, and failing to be authorized to provide securities transactions.
The report asserts that Binance, Zhao, and others established a complex network of legal entities, all under Zhao's direct or indirect control, with no clear business purpose except, in the committee's view, to evade legal compliance. The report also recommends prosecuting an additional 45 individuals, citing "strong evidence" of their alleged involvement in criminal schemes, often connected to various cryptocurrency companies.
According to Congressman Ricardo Silva, who led the committee, Binance's operations are "under suspicion" due to numerous allegations of regulatory non-compliance in many jurisdictions in Brazil. The committee recommends that the Federal Public Ministry launch a comprehensive investigation into all of Binance's operations in Brazil, with a focus on tax evasion, money laundering, and financing of organized crime and terrorism.
Additionally, the committee has recommended that the Brazilian Securities and Exchange Commission (CVM) initiate an investigation into Binance's derivatives sales. The committee claims that Binance's continued offering of derivatives products, despite being instructed to cease derivatives trading, amounts to "repeated breaches" of market regulations. Binance is already under investigation by the CVM for allegedly illegally offering derivatives products in the country.
It is essential to note that these recommendations are not legally binding but rather serve as suggestions to local authorities. The ultimate decision on whether to take further action lies with the police and other regulatory bodies in Brazil. In response to these developments, Binance has reiterated its commitment to cooperating with the commission and local law enforcement in Brazil.
Binance welcomes constructive debate on industry challenges, but it strongly opposes baseless accusations against its users or employees and any attempts to target the exchange. This increased regulatory scrutiny is part of a broader crackdown on Binance, with the exchange facing lawsuits in the United States and having encountered regulatory challenges in Australia and Canada.
In the United States, Binance is confronted with two separate lawsuits filed by local commodities and securities regulators, alleging violations of multiple financial regulations. In Australia, the country's financial regulator conducted a raid at Binance Australia's offices and revoked its derivatives license. Binance also exited the Canadian market due to new regulatory measures in May.
