ROLLUP: CZ Steps Down From Binance | SEC Attacks Kraken | Argentina's Crypto President

CZ is going to serve an 18-month jail time, allegedly. And then also Binance is only pay $4.3 billion. And then once that is over, Binance will have the green light from the United States, which is an expensive tax to pay. But that is a hugely like good thing for Binance in the very long term.

Bankless Nation, it is time for your Friday weekly roll-up. We got a lot to talk about, David. What are we starting with?

CZ stepping down from Binance and stepping into jail. And also Binance paying $4.3 billion to the Department of Justice.

Yeah, we gotta find out what that means. Also, the SEC is attacking Kraken, the crypto exchange, for the terrible charge of what?

Being a crypto exchange?

But also commingling funds. Question mark. What the hell is the deal with that? So we'll unpack all of those details. Coindesk, crypto's largest, earliest crypto news media company, is sold out of Barry Silbert's digital currency group. To who we will discuss. Also, blast, a new layer two on the scene, has caused a bunch of controversy among crypto Twitter and why many people in the crypto industry are kind of just fed up with paradigm. We'll talk about that. And Argentina is getting a new president, a new president elected to Argentina pro the dollar and pro crypto question mark. We will unpack all of this and more.

We should also say it is uh going to be Thanksgiving. You know what? I think I said happy Friday morning, and this is actually coming out on Thursday morning. Uh so happy Thanksgiving to all US listeners. I hope you have a fantastic time uh trying to convert your family members into uh crypto zealots as they ask you, uh, hey honey, how's that crypto thing going? I hope you have a fantastic reply to them because you are listening to Bankless, so you'll know exactly what to say. Uh, and none of it will probably make sense to your family members, as usual.

Oh, honey, I heard one of your crypto friends got put in jail again this week. It's like really bad timing.

And David, you're actually on the West Coast over to visit family for the holidays as well. So uh are they gonna be asking you about crypto?

Oh, uh well, they know, they know I'm very deep in the crypto sphere. So they they they already did. I was home last night. My mom was asking me about it. Yeah, bankless longtime bankless listeners will know when this is my background, David's home for some holiday reason. This is the home, Ryan, that I started my crypto rabbit hole journey in.

This is where I like was losing blood. I was cutting my f fingers on the sheet metal while I was putting together mining computers for Ethereum back in twenty seventeen.

Wow.

Uh yeah.

Yeah.

Crazy. Crazy.

Literally started your crypto journey with blood.

Yeah.

That's uh

dad.

I have scars on my hands from trying to put together mining computers. Yeah.

All right, David, we gotta uh get into the markets. But before we do, want to shout out our friends and sponsors. All right, let's get to the markets, David. Uh the Kraken charts this week. What are they telling us about Bitcoin?

Look at that up line up and to the right. I mean, you're zoomed super far out on the one month, but that is just an upward trend line with plenty of volatility. Bitcoin started the week at 36,000, ending the week at $36,500, up a little bit, keeping keeping the markets alive. Moving into ETH price, also just looking like a straight line up again with some volatility, starting the week at $2,000, ending the week where we are now at $2,040. The ratio between Bitcoin and Ether a little bit up, but relatively flat. And of course, the total crypto market cap $1.44 trillion. Blue chips, Bitcoin and Ether up, marginally up. Some altcoins down the market cap stack, down. But overall, I would say we are floating. We are floating up, I would say.

This is definitely bull market territory. And thanks to Kraken for providing those charts. Of course, no securities traded on Kraken. These are crypto tokens, aren't they, David? We'll get to that story a little bit later. But before we touch on Kraken, let's talk about CZ. CZ, the founder of Binance, is out, David. Take us through the story. So, how did this happen and what happened over the last couple of days?

So the Department of Justice of the United States has actually been investigating Binance for a very long time, since 2018, 2019, and it has finally come to a head, finally come to a conclusion. So CZ is going to plead guilty on Friday, here in Seattle, by the way, in the court in downtown Seattle, to money laundering charges, as well as Binance is going to pay $4.3 billion. This is a settlement between Binance and the Department of Justice and also the CFTC, the Commodities, Futures, and Trading Commission, versus Binance. The SEC is not involved here.

Yeah, so that's that's what's interesting about all of this. You said um he's going to plead guilty, right? Because he hasn't actually pled guilty, and he's going to be pleading guilty in front of a court in Seattle, which coincidentally, David, that's where you are right now. I don't know how that ended up happening. You always seem to end up in the funniest places when uh crypto.

People to crypto leaders going to court for some reason all the time.

Yeah, okay. So so he hasn't pled, but they're putting out all of this these press releases ahead of that, basically. We already know what he's going to plead. We already know what the fines are. We already know what the settlement actually is. And here's a tweet with uh some of those details that you just recapped. So Binance has to pay $4.3 billion in fines. Binance is reaching an agreement with FinCEN, OFAC, the CFTC, and will give them $1.8 billion. That's part of the $4.3 billion. CZ actually made a statement better to ask for for forgiveness than permission toward operating in the U.S. So he's like, oh, oopsie, that was my strategy and

You know, that this is how it's playing out. CZ is also

Brian Armstrong approach I'd say

the opposite. Um, and then CZ, he he's resigning and he can't operate Binance for three years from the start of the agreement. Interesting though, David, he gets to keep all of his equity.

So he can't operate it.

But he's not forced to sell any of it. So he gets to realize all of the upside. He is uh still a uh you know hyper billionaire. Have no idea what his net worth is, but it's it's multiple billions, many billions. In fact, at one point in time, I think Forbes estimated CZ was like maybe the second most wealthy person in the entire world.

Like top five. And so he gets to keep all of that. There's also, though, David, talk of some jail. Like there might be an actual you know sentence. Can you tell us about that?

So he, CZ, is going to be released on bail, $175 million bail. Uh, and the agency, the Department of Justice, is looking to seek an 18-month sentence for CZ. Now, like, why do we know all of these details? It's because this is a settlement agreement between Binance and the Department of Justice. So rather than just carry this out even longer, perhaps like CZ is avoiding a much longer sentence, perhaps life. There's just a this is the terms of CZ. This is the cost of Binance to pay for a clean slate from the United States government. So post this, CZ is going to serve an 18 month uh uh jail time, apparently, allegedly. And then also Binance is going to pay $4.3 billion. And then once that is over, Binance will have the green light from the United States, which is an expensive tax to pay.

But that is a hugely like good thing for Binance in the very long term.

So he's actually going to jail, though. That that's crazy. I I wonder if this is like house arrest, if he can negotiate that, or if it's actual jail jail. If it's like uh is this kind of like you know, the white collar cushy jail, or is this

Arthur Hayes jail or is it Dan Bankman-Free jail? Like

Yeah.

on this on this spectrum.

That seems to be unclear. Can we talk really quick, David, about what Binance is actually being charged for, though? Like what crime did they uh commit and what what what is CZ actually pleading guilty to here?

I'm sure they would love to go after CZ and Binance for every single thing under the sun. But the thing that has finally come to a head here is allowing knowingly allowing money laundering and terrorist financing to occur on Binance. Binance famously was pretty loose in the early days about KYC on the exchange. Uh you could you could just kind of flub your KYC, your VPN, like check, I'm not a United States citizen. And then you could just like use Binance. Um and so they and there were reports. Remember when the sign the signal chats that came out with uh CZ and other executives at Binance, they knowingly allowed Terrace to um to operate on Binance.

The ironclad proof of this.

There's proof of this. And so it was not only like that they allowed it, but they also knew about it and they didn't do anything about it. And so this isn't this is why the SEC is notably absent from this. This is not

child's play of Gary Gensler and his influencer campaigns. This is the Department of Defense

having a problem with Binance allowing for terrorists to funnel money through Binance. And CZ is like, oh, we're turning a blind eye.

Uh, and so it's kind of like the highest level of offenses you could make towards the United States government.

Yeah, you said that the Department of Defense and they're kind of associated here. Uh, it's like the agencies of FinCEN and OFAC. And by the way, if you're not familiar with what these agencies are, we did an entire podcast on the financial surveillance apparatus that you should absolutely check out. But notably, what CZ did not do and what Binance did not do, it was not an FTX style fraud.

Right.

Okay. So there was not a missing funds from the exchange of billions of dollars. And by the way, that that was rumored earlier in here, at least on crypto Twitter. It's just like, oh my God, CZ is doing the same thing that FTX is doing. That's not what these charges are for. And you have to assume that uh these investigators went through absolutely everything they could. There's no gaping hole on the balance sheet. So it's not that. And as you said, it's not an SEC snafu. It's all about financial surveillance. It's OFAC, it's it's uh FinSIN, it's not doing the AML KYC. This is um the statement from C Z. David, you want to read some of this?

CZ tweets out today I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally, but I know it's the right thing to do. I made mistakes. I must take responsibility. This is the best for our community, the best for Binance, and the best for myself. And then he announces that Richard Tang, the former uh head of global uh regional markets, is now the new CEO of Binance. Um, and he discusses like the qualifications of Richard and who he is. Uh and then he talks about what's next for him. And I thought this was like a pretty crazy line. I will take a break first. I have not had a single day of real phone off breaks for the last six and a half years.

Yeah.

It's easy, but it's been grinding for six and a half years. Um after that, my current thinking is I will probably do some passive in investing, being a minority token shareholder in startups in areas across blockchain, web3, and defy, AI and biotech.

I'm happy that I will have more time to spend looking at DeFi.

I cannot see myself being a CEO driving a startup again. I'm content being a one-shot entrepreneur.

Um, on that note, I am proud to point out that in our resolutions with the United States agencies, they do not allege that Binance misappropriate appropriated any user funds and do not allege that Binance engaged in any market manipulation. Funds are seifu, which is a meme for safe.

Um,

with that, I look forward to seeing the new leadership take the reins. Please join me in congratulating Richard on his well deserved promotion. Onwards, CZ.

So, no misappropriation of user funds, no market manipulation, but uh clearly doing illegal activity with respect to financial surveillance uh laws and regulations that are in the book. And we'll we'll talk what this means, like how people are reacting to this and how CZ might be viewed through history. But all of this also came to a head in a press release that the Department of Treasury and I believe the CFTC kind of stood up at 3 p.m. on Tuesday, November 21st. And actually, when they announced all of this, some of this news came out ahead of that, and some of it was tied up in this press release. And Janet Yellen actually spoke about this. And here she is addressing crypto specifically in what I would say is a not so veiled threat. Let's listen.

And let me be clear.

We're also sending a message to the virtual currency industry more broadly, today and for the future.