The world’s largest crypto exchange continues to lose CEOs

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Former Binance.US CEO Brian Brooks at an event in June. Photo: Eva Marie / Bloomberg via Getty Images

When the U.S. arm of Binance, the world’s largest cryptocurrency exchange, abruptly announced this spring that it had hired Brian Brooks as its new CEO, it seemed like a huge victory for the company.

Brooks was coming out of a tenure as Acting Comptroller of the Currency, where he headed the federal agency that charters and regulates the country’s banks. He took on this role after several stints at other regulators and as legal director of Coinbase, the new public crypto exchange. He was, in other words, exactly the kind of guy you would want on your team if you were preparing for, say, increased regulatory oversight of crypto as the new chairman of the Securities and Exchange Commission, Gary Gensler, seems to be telegraphing.

Binance is the giant in the crypto trading universe: with a transaction volume of between $ 20 billion and $ 30 billion in a given 24 hour period, it eclipses its next competitors (Coinbase, by comparison, manages less than one. fifth). This made Binances founder and CEO Changpeng Zhao (his name is CZ) a multi-billionaire not only one of the richest and most powerful figures in the crypto industry, but arguably of the period. of global finance.

So, hiring heavyweights to oversee Binances’ growth operations in the US made a lot of sense. The recruiting of Brooks was such a blow that it was even easy to forget what it meant for her predecessor, Catherine Coley, who was named CEO of Binance.US when it launched in late 2019. Coley, 32, had been the only woman to hold this post. CEO of a major crypto exchange, and with the rise of Brookss, she was apparently forced to leave. A young transplanted from Wall Street to crypto, Coley was an affable and outspoken evangelist not only for Binance.US, but for the digital asset industry as a whole, often tweeting analogies between crypto and basketball and punctuating her exclamation point messages. But she had given no sign of resigning, and the press release announcing Brookss’s hiring made no mention of her, raising questions as to whether the hangar had even been advertised before the announcement. Shed continued to make media appearances in the days leading up to his ouster. His last tweet dates from the day before the press release.

And then on August 6, after just over three months of work, Brooks followed her to the door: Greetings to the #crypto community. Notifying all of you that I have stepped down as CEO of Binance.US, Brooks announced on Twitter. Despite the differences on the strategic direction, I wish my former colleagues every success. New exciting things to come!

While a CEO change hasn’t raised many eyebrows, a second in the space of a season certainly did, especially given Brooks’ solid good faith in Washington. This time, no CEO has been named to replace him, and a Binance.US spokesperson declined to say whether the company would seek one.

I remember talking to him after I got the job and he was very excited, and it looked like he was really going to help put in place a strong regulatory compliance regime for Binance.US, and I think he had the full support of the board, ”said Anthony Tu-Sekine, Washington-based partner at law firm Seward & Kissel and responsible for its blockchain and cryptocurrency practice. It is certainly disappointing that his term is ending so quickly. The first thought in my mind when I read about it was one of these, uh oh, will the other shoe fall off soon?

Before Brooks accepted the position, Binance was reportedly already under investigation by the Commodity Futures Trading Commission to see if it illegally allowed Americans to conduct certain transactions on the exchange. In May, Bloomberg reported that the Justice Department and the IRS were also investigating Binance. In June, the UK banned the exchange and in July, Thai regulators filed a criminal complaint. (Amid all this, Binances CFO Wei Zhou suddenly resigned in early June citing personal reasons, according to Coindesk.)

But Binance had launched its U.S. entity to hopefully address some of these concerns: As a foreign entity without an official seat, Binance cannot legally serve U.S. customers, in part because it offers trading in certain cryptocurrencies that the SEC considers illegal securities (including XRP tokens from California-based technology company Ripple). Binance.US was designed to operate separately, serving US customers while listing a more limited set of digital coins. Still, Binance.US had not escaped the attention of authorities, and with the growing problems, Brooks was well aware of the US investigations when he took the job, according to a person familiar with the warrant situation. intimidating. Many were surprised Brian hadn’t left sooner, says Mike Alfred, an advisor and investor in crypto and tech startups who also co-founded Brightscope.

In a statement acknowledging Brookss’s departure, but without thanking him or wishing him good luck, CZ said that I remain confident in the affairs of Binance.US. This transition will have no impact on Binance.US customers.

Zhao Changpeng in 2019. Photo: Andrey Rudakov / Bloomberg via Getty Images

Behind the scenes, however, Brooks and CZ had banged their heads in the days leading up to his resignation, according to a person familiar with the situation. Brooks had come to work with a three-pronged plan to resolve the regulatory investigations plaguing Binance, focusing on separating Binance.US from its international sibling. The plan included raising new venture capital and expanding the board of directors of Binance.US, of which CZ was chairman, with new U.S. members not affiliated with Binance. In an interview with Bloomberg in May, shortly after starting, Brooks explained that his crucial task would be to speak to regulators to convince them of Binance.US’s renewed focus on legal compliance. We are not a Binance alter ego, he said in the interview.

Brooks quickly set his plan in motion. A pillar of its strategy was to move the Binances technology that the company licensed to Binance.US before Brooks started from Asia to the United States. At the end of July, the transfer of technology (control of certain trading processes and other functionalities) to the American servers was on track. , and Brooks was preparing to further sever the overlapping relationship between his American domain and the international domain that CZ led. Were already in the middle of this migration process. So that relationship will go away pretty quickly, Brooks told Forbes in late July.

The transfer was the last piece of the puzzle that Brooks said would put Binances’ regulatory concerns in the past. But in early August, as Brooks finalized plans for the transfer, CZ suddenly pulled the plug, the person said. The confrontation took colleagues by surprise; The day before Brooks resigned, Binance.US chief marketing officer Graham Kahr was quoted praising his boss in The New York Times, commenting that Brian was a powerful regulator who was tough on the banks. With his strategy rejected, Brooks saw no way forward to resolve the company’s regulatory issues and, therefore, could no longer work on it. He therefore announced his resignation on August 6.

CZ told Intelligencer in a post that was the wrong story, but declined to clarify or comment on why Brooks left. He said Binance.US is still in the process of raising venture capital and diversifying the board. [as] ensure proper separation of technology and data. A spokesperson for Binance.US, in a statement to Intelligencer, reiterated that the company remains committed to its stated business plan, listing fundraising and board expansion, but did not specifically mentioned the intention to move Binance technology to the United States.

Without a new leader for Binance.US and the uncertainty surrounding the investigations, some lawyers and crypto investors are bracing for possible regulatory sanctions, although it is not clear whether Binance as a whole or the U.S. entity will be a target. Doug Schwenk, CEO of Digital Asset Research, which monitors and tracks exchanges to ensure they meet institutional trading standards, said the company is monitoring Binance and Binance.US for new developments and possible action. government enforcement. We need transparent leadership, so we want to know who the new leadership is, says Schwenk. What we need to see is that Binance.US remains a separate company, run by a separate management team, and has different sets of compliance policies. So we’re watching closely to see what’s going on there.

Brooks, meanwhile, will be fine. He has already received dozens of job postings from crypto companies looking for his unique experience in the industry and financial regulatory agencies.

The fate of her predecessor, Catherine Coley, remains a mystery, however. Until recently, her social media bio always mentioned her as the CEO of Binance.US. By the time Brooks joined the business, she was already gone. In July, a Decrypt article noted that she was indeed missing. She did not respond to multiple messages sent to her various accounts. She has a seemingly active Instagram, but it appears to be fake: the first account published on May 31st about six weeks after her ouster and a month after Brooks began showing her carrying and holding a variety of Binance booty. included a bagel, and bears the caption: Binance got it all #dogecoin #coinbase #bitcoins. The most recent post, a selfie of her in a neon polka dot mask and bitcoin t-shirt uploaded earlier this week, is the same one he originally posted to his Twitter feed in February. The number attached to the account, along with an area code for Washington state, rings until an automated message from Verizon indicates that the call cannot be terminated.

As for CZ, finding a new person to run his businesses has been a hot topic of discussion for him lately, even before Brooks stepped down. But it was not clear whether CZ was looking for a potential replacement for Brooks or for himself. After telling reporters at the end of July that he was ready to pass the baton on to someone who could do a better job, CZ then made it clear on Twitter that he had no plans to step down. We would very much like to hire a CEO who is well trained in compliance to show our commitment to compliance as it is the top priority of the organization, CZ wrote on Twitter. The CEO’s contingency planning begins on day 0, just like any other role. We are still recruiting CEOs, he added.

This is certainly the case lately.

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