A $100 million venture capital round collapsed for Binance on fears the CEO owned too much of its independent US arm, report says

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A $100 million venture capital round collapsed for Binance on fears the CEO owned too much of its independent US arm, report says
Binance CEO, Changpeng Zhao. REUTERS/Darrin Zammit Lupi
  • Binance.US has become a crucial business unit for Binance, operating as the exchange's nominally independent, regulation-friendly arm.
  • But questions about its independence plagued a recent pre-IPO fundraising round, according to the New York Times.
  • A Binance spokesperson told the Times that a fresh fundraising round for Binance.US was due soon and that IPO plans are still on track.

Binance's talks with venture capitalists to raise at least $100 million fell apart this year after fears that CEO Changpeng Zhao owned too much of the crypto exchange's US division, according to a New York Times report.

First set up to appease wary American regulators, Binance.US has become a crucial business unit for Binance, operating as the exchange's nominally independent, regulation-friendly arm. As Binance.US scaled up, Binance made several high-profile hires of former regulators, including installing former Comptroller of the Currency Brian Brooks as CEO.

But just how independent is Binance.US? The question plagued a recent fundraising round that included venture capitalists like GreatPoint Ventures, according to the Times.

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Brooks reportedly pitched GreatPoint on a $100 million fundraising round, meant as a prelude to an eventual Binance.US IPO. He reassured prospective investors that Binance's US division was independent from the rest of the company and would fully comply with American regulation. That meant adhering to strict anti-money laundering and know-your-customer protections.

But two factors scared GreatPoint away, according to Ray Lane, its managing partner, who spoke with the Times. First was a DOJ-IRS probe into possible money laundering and tax evasion violations. And second was Zhao's ownership stake in the supposedly independent company - around 90% of Binance.US.

"How would we ever feel comfortable that it was an independent company using the same technology?" Lane told the Times.

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Brooks resigned from Binance.US in August, citing "differences over strategic direction."

A Binance spokesperson told the Times that a fresh fundraising round for Binance.US was due soon and that IPO plans are still on track.

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