Fraud allegations hit Binance hard, crypto prices take a dive

If you’ve been following the crypto industry’s relationship with the US government over the past year, then you probably know what’s coming.

As per Semafor’s report published earlier this month, US Department of Justice (DOJ) might finally hit Binance – including its CEO Changpeng Zhao – with criminal fraud charges. If this turns out to be true, then it will be the battle of the century. Forget Manchester vs. Manchester United: This is CZ vs. the US attorney general.

However, the report also mentions that the DOJ might consider other options, like slapping hefty fines or maybe some deferred or non-prosecution agreements. Anything to avoid another cryptocurrency implosion!

It is likely that any lawsuit – or maybe even the threat of one – could bring CZ and Binance to the negotiating table.

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The news immediately caused panic on crypto exchanges. Bitcoin prices went down by 2% while Binance’s BNB token fell by 4.8%. Bitcoin was actually on the rebound after that massive drop in 2022, but now it might stay chilling below US$30,000.

But you know what? In a battle this size, there might not be any winners, and the US government knows this. There are legitimate concerns that an indictment could send shockwaves throughout the crypto industry, triggering a run on the exchange. When FTX collapsed in November 2022, the damage was in the billions. With Binance, it could be in the trillions.

This isn’t FUD, given that the industry is still on shaky ground following the crypto winter. It wouldn’t take much to set off a chain reaction of chaos.

The company is already in enough legal trouble, particularly with the US Securities and Exchange Commission. The agency has sued Binance for 13 civil offenses, including charges that it was operating an unregistered securities exchange and not bothering to keep US customers off its platform.

Binance is also facing a lawsuit from the Commodity Futures Trading Commission for allegedly trying to dodge US laws.

And let’s not forget about Binance’s compliance program and what a total belly flop it is.

The company was supposed to verify customers’ identities to prevent terrorist financing and money laundering. Instead, Binance has been accused of encouraging its employees to help customers find ways to avoid compliance.