Unexpected Leadership Change at Binance France

Binance France has replaced its co-founder Changpeng Zhao (CZ) with two new shareholders. This step aims to maintain its operational status in France and comply with local regulations in the European Union's second-largest economy. The change follows Zhao's legal issues and is part of a broader effort to align with European Union standards as new regulatory frameworks, such as the Markets in Crypto-Assets (MiCA) regulation, take effect.

Legal Issues and Restructuring

CZ, who previously owned 100% of Binance France, found himself in hot water after pleading guilty to violating US banking laws last November. This legal snag necessitated a restructuring of Binance's ownership to comply with French regulations and safeguard its operational status within the EU. Under these regulations, a company's majority shareholder cannot have a criminal record.

To address this, Binance introduced Yulong Yan and Lihua He as the new majority shareholders of Binance France, each holding 50% of the shares. Both are co-founding team members of Binance. Yulong Yan, also known as Allan Yan, was identified in the original Binance whitepaper and was a co-founder and product director of Bijie Tech, a Chinese exchange services company that was shut down by the Chinese government in 2017. Lihua He, while not mentioned in the 2017 Binance whitepaper, remains an enigmatic figure with little publicly available information.

“This shareholder transition is part of Binance's broader 'global restructuring project' to align with regulatory standards across different jurisdictions.”

Strategic Importance of France

France has been a strategic hub for Binance in Europe, with significant investments and high-profile events in Paris. However, Zhao's criminal conviction and ongoing investigations into Binance for potential money laundering and unauthorized advertising created uncertainty over Binance's ability to secure a MiCA license. This license is crucial for maintaining Binance's operational legitimacy in France and, by extension, within the EU as new regulatory frameworks like the MiCA regulation emerge. The MiCA regulation, which will be fully implemented over the next two years, allows crypto companies to 'passport' their license from one EU country to operate across all 27 member nations.

Ongoing Investigations

Additionally, Binance faces two investigations from French prosecutors about potential money laundering and premature advertising practices. These investigations further complicated Binance's path to securing a MiCA license, adding another layer of urgency to the shareholder restructuring.

Financial Controversies in South Korea

Binance, also the largest shareholder of South Korean cryptocurrency exchange Gopax, recently sold the asset claims of Gopax victims at less than half their face value on May 27. This move led to substantial financial losses for investors and contradicted Binance's earlier promise to fully compensate victims of the 'GoFi' virtual asset deposit service. Instead of using its funds to cover these losses, Binance sold the claims at a discount amid rising cryptocurrency prices, increasing GoFi's debt to an estimated KRW 100 billion ($75 million). Investor discontent has grown, especially since Genesis, the service associated with Gopax, had its bankruptcy compensation plan approved, committing to return 77% of bond funds to creditors.

This series of events marks a significant chapter in Binance's history as it navigates through legal challenges and regulatory landscapes across different jurisdictions.