(Bloomberg) -- Binance.US, the digital-asset platform owned by crypto billionaire Changpeng “CZ” Zhao that was created to serve American clients, has a significant tech workforce in China. 

Binance.US currently has about 100 contract workers in Shanghai, mostly in engineering and product roles, according to two people familiar with the matter, who asked not to be identified as they are not authorized to speak to the press. For at least a year there has been a plan to relocate some of the workers to North America, though progress has been slow, they said. 

The Commodity Futures Trading Commission identified what it alleged were blurred lines between Binance.US and Binance Holdings — the  biggest cryptocurrency exchange by far, also controlled by Zhao — in its lawsuit against the global company filed last month. Binance operated an “intentionally opaque common enterprise” that long ago should have registered with the CFTC but didn’t, the agency alleged in announcing the action, which also targets Zhao and seeks fines and permanent trading and registration bans. 

Read the CFTC’s lawsuit here 

The CFTC complaint accuses Zhao and Binance of soliciting US users in violation of federal laws and using Binance.US as a “laboratory” to identify big local clients for the global site. It makes no mention of the Shanghai contract staff and didn’t raise concerns with past or current operations in China, which represent a minority of its workforce and aren’t of themselves unlawful.

But any links to the country where Binance was founded may raise questions by US authorities, according to former senior US government officials interviewed by Bloomberg News. The US Securities Exchange Commission, Justice Department and Internal Revenue Service have also been probing Binance, Bloomberg News has reported. Spokespeople for the CFTC, DOJ and Treasury Department, which runs the IRS, declined to comment. A representative for the SEC didn’t respond to requests for comment.

“Binance.US has a global workforce of more than 500 employees and contractors that serve our US-based customers,” a Binance.US spokesperson said in a statement. “Binance.US’s experienced, independent leadership team controls the direction of the company, its assets, and the supervision of customer accounts and data, all of which is stored on the Amazon Web Services platform based in Richmond, Virginia.”


Binance.US was launched in 2019 using resources and personnel from the international platform, which at the time had operations in China, according to a person close to the global exchange at the time, who asked not to be identified for fear of retribution. Gradually some of the Shanghai-based workers moved over to the US site, which also continued to hire new contractors in the city, people familiar with Binance.US said.

Binance, which never named a corporate headquarters, was started around six years ago by Zhao in China. Soon after, the Chinese government banned crypto exchanges, driving Zhao to seek bases in more crypto-friendly locations at the time like Malta and Japan, but keeping some workers in China, according to four people familiar with the company who asked not to be named because the information wasn’t public. 

Since then, Zhao has sought to dispel the notion that his empire maintains connections to China, which in 2021 outlawed all crypto transactions. In a blog post last year, Zhao said by late 2018 most Binance employees had left China and only a few customer-service agents remained. The post did not specify whether the agents were employees or contractors.

The China-based tech team may have raised questions for Binance.US had it decided to move ahead with a proposed acquisition of bankrupt American crypto brokerage Voyager Digital Ltd, said Jerry Comizio, an adjunct law professor at American University and former official at the Treasury Department and the SEC. The deal might have been subject to a foreign investment review from the Committee on Foreign Investment in the United States, according to a filing to the bankruptcy court from the Justice Department, which had objected to the deal for other reasons. 

“There are still a lot of very important and open questions about what ties there are with China,” Comizio said. “For Binance, this has become a regulatory issue on steroids because of the foreign policy aspects related to its ties to China.”

Voyager had worked out a deal with federal regulators to allow the sale to Binance.US to close without first resolving a dispute over an exculpation clause. A handful of US and state regulators had also opposed it citing a range of concerns, including issues around Binance.US’s terms of service — which states that the firm may transfer data outside the US — an absence of adequate disclosures, and Binance.US’s lack of a license in New York state. 

On Tuesday, Binance.US announced it was scrapping the Voyager deal, saying “the hostile and uncertain regulatory climate in the United States has introduced an unpredictable operating environment impacting the entire American business community.” 

Ties to China have become a growing concern for CFIUS, said Harry Broadman, a former official at the committee, which is chaired by Treasury Secretary Janet Yellen. While a US company having Chinese workers shouldn’t on its own raise red flags for the committee as that is common in sectors like oil and gas, it’s something that would get factored into the total picture, he said, which would also include looking at Binance.US’s connection to the global Binance exchange. It is unclear whether the nature of the workforce being contractors would affect any scrutiny.  

Legacy Entanglement

China-based workers also would raise the specter of legacy entanglement between Binance’s global and US businesses.

“I don’t think the United States government sees a huge difference between Binance US and Binance the global entity,” said Sultan Meghji, former chief innovation officer for the Federal Deposit Insurance Corp. and now professor of financial technology and cybersecurity at Duke University and fellow at the George Mason National Security Institute. 

Divisions between the global and US platforms were blurrier in the earlier days. Binance.US’s first chief executive officer Catherine Coley visited Shanghai during her tenure and discussed a range of issues with staff working for the international platform, according to the person familiar with the exchange and Telegram messages seen by Bloomberg News. In a chat for Binance executives and employees, she responded to suggestions about ad campaigns, charity programs and margin trading on the US site. Coley, who left the company in 2021, didn’t respond to a request for comment.

“When Binance.US was founded, there was an agreement with the Binance.com tech team to build out the tech infrastructure and provide other forms of support for the new US-regulated exchange,” a spokesperson for Binance said. “This kind of agreement was not unusual and, in fact, the founding team had previously licensed the tech stack to other non-Binance affiliated organizations as well,” they said, referring to the set of technologies used to develop an application.   

Over the years, the exchange has relocated hundreds of full-time employees to the Middle East and Europe, according to the spokesperson. 

Perception Concerns

In mid-2021, Coley was succeeded by Brian Brooks, a former acting comptroller of the currency. His team was concerned about public perception over the Shanghai-based technology workforce, as well as the risk that having technology operations there could make Binance.US more exposed to the whims of Chinese authorities, according to a person close to the team’s thinking who asked not to be identified as the discussions were private. 

In a bid to lessen the dependence on Shanghai, Brooks’s team tried to hire heads of engineering and product in the US, the person said. Brooks left after three months, however, citing “differences over strategic direction.” He didn’t respond to a request for further comment about his time at Binance and circumstances of his departure. 

Brooks was succeeded by Brian Shroder, a former Ant Group and Uber executive who was working for Binance at the time and has since tried to disentangle the operations of the global and US exchanges over time. Outside the US, Binance.US has been growing its office in Vancouver, which has about 100 employees including the head of product, most of which are full-time staff, the Binance.US spokesperson said. 

--With assistance from Allyson Versprille and Steven Church.

(Updates to with the news that Binance.US scrapped its deal to buy Voyager’s assets.)

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