Following his jail sentence, Changpeng Zhao, also known as CZ, the former head of Binance, might find his ability to influence exchange operations significantly curtailed. CZ’s incarceration is set to conclude on September 29th.
Nonetheless, his impact on the exchange is likely to be restricted to his role as the major stakeholder exclusively.
Recent comments from current CEO Richard Teng suggest that CZ has been permanently barred from directing the exchange as per the terms of a plea agreement in the United States.
As part of a plea deal with US authorities towards the end of 2023, Binance received a hefty $4 billion fine. The settlement additionally enforced a three-year ban on CZ serving as CEO and sentenced him to four months in prison.
These actions came in the wake of allegations that Binance had violated the US Bank Secrecy Act.
Implications of CZ’s Lifetime Ban
The unexpected nature of the reported “lifetime ban” following the three-year restriction in the plea deal has stirred curiosity within the community. Nonetheless, Richard Teng affirmed that CZ may still oversee his interests as the primary shareholder.
“In his capacity as a shareholder, CZ retains the authority to monitor the company’s performance. If the outcomes fall short of his expectations, he reserves the right, as an investor, to propose changes such as a new board of directors or CEO… Shareholders maintain the ability to put forth resolutions.”
Despite CZ’s substantial power as the leading shareholder to exert influence over the exchange, US regulators, as voiced by Teng, will closely scrutinize his actions.
Under the terms of the plea agreement, the US will uphold oversight of the exchange for a period of three to five years to assess the effectiveness of the firm’s internal controls.
According to Vanderbilt University law professor Yesha Yadav, CZ’s role as the major shareholder could come under supervision.
“The appointed monitor will play a critical role in providing checks and balances to support the board and will have discretion regarding CZ’s pivotal role as a major shareholder.”
Contrary to this perspective, former federal prosecutor Daniel Richmann stated that the ban was not an obligatory measure and indicated that it did not expressly prohibit CZ from returning to the CEO position.
“In essence, a specific provision could have been included in the agreement to prevent Binance from reinstating him, enabling the government to cry foul if the company did so. However, such a clause is absent in the current deal.”
Notably, in his transition declaration to the incumbent CEO, CZ expressed readiness to provide consultation to the team within the constraints of the US agency resolutions.
“Given my status as a shareholder and former CEO with profound insights into our organization, I stand available for team consultations as required, in line with the guidelines outlined in our US agency resolutions.”
The subsequent course of CZ’s involvement with the exchange post his imprisonment is yet to unfold. Meanwhile, BNB was marginally maintaining its position above $500 amidst a general market downturn.