A congressional committee in Brazil has recommended that local law enforcement consider indicting Binance CEO Changpeng “CZ” and three other Binance executives after conducting an investigation into financial pyramid schemes in the country.
On October 10, this committee released a comprehensive 500-page final report, which accused Zhao and Brazilian Binance executives Daniel Mangabeira, Guilherme Haddad Nazar, and Thiago Carvalho of engaging in fraudulent management practices, operating without proper authorization, and offering securities trading without the necessary permissions.
In their report, the committee, led by deputy Ricardo Silva, asserted that Binance, Zhao, and the others had established a complex network of legal entities, all ultimately controlled by Zhao, with no clear business purpose other than evading legal compliance.
The report also recommended the indictment of 45 other individuals with “strong evidence” of involvement in alleged criminal schemes, some of whom were connected to various cryptocurrency-related companies, including 123milhas, an online travel agency, and 18K Ronaldinho, a cryptocurrency project.
Silva emphasized that Binance had been facing regulatory non-compliance allegations in multiple jurisdictions, and in Brazil, their operations were shrouded in suspicion.
The committee suggested that the Federal Public Ministry initiate an investigation into all of Binance’s operations in Brazil, focusing on potential tax evasion, money laundering, and financial support of organized crime and terrorism.
Furthermore, the committee proposed that Brazil’s Securities and Exchange Commission (CVM) launch an investigation into Binance’s sale of derivative products. Despite being instructed to halt derivative product trading, Binance reportedly continued offering them, constituting a “repeated violation” of market regulations. Binance was already under investigation by the CVM for allegedly providing derivative products unlawfully in the country.
It’s important to note that the committee’s recommendations are not legally binding; they serve as suggestions to local authorities, who will decide whether to proceed with any further actions.
In response, Binance expressed its commitment to collaborating with the committee and local law enforcement in Brazil. The company welcomed constructive discussions about challenges in the cryptocurrency industry but strongly rejected unfounded accusations of wrongdoing against its users or employees and any attempts to target Binance.
This regulatory scrutiny against Binance in Brazil is part of a broader international crackdown on the exchange. In the United States, Binance is facing two separate lawsuits from local commodities and securities regulators, alleging violations of financial regulations by Binance and its top executives. In July, Australia’s financial regulator searched Binance Australia’s offices after revoking its derivatives license earlier in the year, and Binance exited the Canadian market in May due to the country’s new regulatory controls.