Binance and the U.S. Justice Department

Back in February, Binance’s top spokesperson told the Wall Street Journal that the cryptocurrency giant was negotiating with the Justice Department and other agencies to settle the legal mess related to its past transgressions. The settlement would involve fines and some other measures, but the upshot would be that Binance and the U.S. government would let bygones be bygones. “It will be a good moment for our company because it allows us to put it behind us,” said the spokesperson at the time.

So much for that. Right now, Binance and the Justice Department do very much not have a deal, and, as Fortune reported, the spokesperson has quit along with the company’s general counsel, its SVP of compliance, and other top executives. One can only imagine what federal prosecutors—who are rumored to be teeing up criminal charges against the company and CEO Changpeng Zhao—think about this development. If they weren’t bringing their big guns before, they certainly will now.

The question is, what happened? Why did Binance’s deal with the government fall apart? One possibility is that, at some point in the negotiations, the Justice Department took a harder line at the behest of the White House, which has become increasingly anti-crypto in recent months. If that’s the case, Binance might have concluded that the financial and other burdens proposed in the settlement did not add up.

It’s also possible that it was Binance, and its hardheaded CEO in particular, that tanked the settlement. You may recall that Bloomberg published a lengthy profile of Zhao’s “heir apparent,” a veteran executive who was well suited to deal with regulatory headwinds. Reading between the lines, it’s not hard to imagine that the deal between the Justice Department and Binance called for Zhao to step aside as a condition of the settlement. And that Zhao then changed his mind and decided he would take his chances rather than be forced to step away from an empire he built from the ground up.

As of today, we just don’t know for sure. But what is clear is that Binance will now be fighting for its life. Zhao has put a brave face on the departures of the company’s senior legal and compliance staff, suggesting it is just more FUD (fear, uncertainty, and doubt) by the bumbling media. He has also framed the situation as a problem in the U.S.—not for the company more broadly, which appears to be doing fine financially.

The trouble with this is that, for better or worse, the U.S. government has become incredibly effective at flexing its financial might around the globe. Many U.S. allies, including Australia and the Netherlands, have already moved to cut Binance off from the banking system. And if the Treasury Department decides to label the company as a sanctions violator—a radioactive status as far as banks are concerned—then look out. A year from now, Zhao may wish he had made a deal.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

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