Regulators in Brazil Accuses Binance of Running Pyramid Scheme

Regulators in Brazil Accuses Binance of Running Pyramid Scheme

UTC by Bhushan Akolkar · 3 min read
Regulators in Brazil Accuses Binance of Running Pyramid Scheme
Photo: Web Summit / Flickr

The Congressional Committee of Brazil noted that Binance was running a pyramid scheme and operating while bypassing the regulators. The case is now for the Brazilian police to look after.

A congressional committee in Brazil has made allegations against Binance, asserting the platform’s involvement in a fraudulent pyramid scheme. The committee also accuses Changpeng “CZ” Zhao, the CEO of Binance, of having ulterior motives in the establishment of multiple companies in the region.

The statement from the committee reads:

“BINANCE was one of the companies used in the fraudulent financial pyramid scheme attributed to former waiter Glaidson Acácio dos Santos”.

Binance in Brazil

Brazil’s congressional committee has put forth a recommendation to bring charges against three prominent figures associated with the Binance cryptocurrency exchange.

The individuals in question are CEO Changpeng Zhao, Brazil’s General Director Guilherme Haddad Nazar, and Latin America’s Institutional Relations Director Daniel Mangabeira.

In its allegations, the committee also added that Binance conducted transactions worth USD $791.7 million while bypassing Brazilian regulators. “BINANCE moved BRL 40 billion in 2021 without Acesso, the regulated institution, having any control over who the customers were and whether the origin of the funds was legal,” the report reads.

Note that the charges are still recommendations from Brazil’s Congressional Committee. The Brazilian police now hold the responsibility of determining the subsequent steps in action. Furthermore, the comprehensive 508-page report primarily delves into the signs of questionable practices in the management of cryptocurrency-related businesses.

Charges against Binance Chief CZ

Additionally, the claim suggests that Binance CEO CZ established several companies within Brazil as a means to circumvent adherence to local financial regulations.

“Changpeng Zhao, set up an opaque network of legal entities, all controlled directly or indirectly by Zhao, with no defined business purpose and with no other purpose than evasion of compliance with the law,” noted the report.

The committee contended that this lack of supervision led to a variety of issues, with the most notable being the exploitation of the crypto exchange in a pyramid scheme. Additionally, it makes reference to an alleged statement made by Binance’s chief compliance officer, claiming that the company aimed to evade regulatory measures at any expense.

The report also notes that local authorities in Brazil don’t have enough tools to track users. “Controller Changpeng Zhao claims by the media that the company’s headquarters are wherever it is located at the time, reflecting a deliberate approach to avoid the costs of regulation borne by any legitimate company,” the report notes.

Binance’s chief CZ has been facing regulatory scrutiny from across the world. Some of the US regulators have also blamed CZ for the downfall of the crypto exchange FTX. They assert that CZ’s tweets, which were posted prior to the exchange’s downfall, cast uncertainty on its liquidity and financial stability. Moreover, they claim that these tweets triggered a surge in withdrawals, ultimately leading to the exchange’s demise.

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