Austin Campbell, an adjunct professor at Columbia Business School and former chief risk officer at Paxos, has shed light on the legal issues surrounding Binance founder Changpeng Zhao (CZ) and FTX founder Sam Bankman-Fried. Speaking to Federal Newswire, Campbell highlighted that the case against CZ bears similarities to failures at major banks, whereas Bankman-Fried stands accused of misusing customer funds and deceiving investors. He also pointed out that U.S. government agencies have recognized many of Binance's historical compliance issues as resolved.
"So when we look at Binance, what we see is the following: 1 - Most of the US complaints are civil in nature (e.g. failure to register with the CFTC, not having an effective AML/KYC program, etc.) in the Binance case," said Campbell. "2 - The criminal components all relate to, essentially, ineffective controls and not policing bad actors on their platform. Notably those are also legacy issues (e.g. the worst abuses were years ago, not current and ongoing, and the DoJ admitted Binance had already partially remediated these issues). So when I look at that, I see something very different than SBF [Sam Bankman-Fried], who was essentially stealing customer money and running a scheme that is more directly comparable to Bernie Madoff, whereas Binance looks more like the ongoing risk and controls failures that have incessantly plagued Citi post-2008."
According to a post on Binance's website, multiple government agencies acknowledged improvements in the crypto exchange's compliance protocols during the process leading up to its resolution with the U.S. government in November. The U.S. Financial Crimes Enforcement Network (FinCEN) consent order stated that Binance "remodeled its compliance program governance and organization structure, including by hiring new compliance leadership with professional compliance experience in the financial sector and law enforcement." Furthermore, it was noted that "Binance’s current compliance program would not permit users identified as associated with terrorist financing to remain on the platform or remove funds."
CNBC reported that, as part of this settlement, CZ stepped down from his role as CEO of Binance and pleaded guilty to failing to maintain effective anti-money laundering (AML) controls. His sentencing was recently postponed from February 23 to April 30, with a potential prison term of up to 18 months looming over him. Binance paid $4.3 billion in fines as part of the resolution. CZ incurred an additional fine of $50 million.
Federal Newswire previously reported that Sam Bankman-Fried, founder and former CEO of crypto exchange FTX, was convicted in November on seven criminal charges including wire fraud and conspiracy to commit money laundering. Damian Williams, the U.S. Attorney for the Southern District of New York, revealed in a December 2022 press release that these charges stemmed from an alleged "wide-ranging scheme" to misuse billions of dollars of FTX customers' funds while misleading FTX and Alameda investors. Williams stated, "As today’s charges make clear, this was not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple."
Following the collapse of FTX in November 2022, CNBC reported that approximately $10 billion in customer funds was missing. Bankman-Fried reportedly used this money to hedge investments and fund his extravagant lifestyle. His sentencing is scheduled for March 28, with FTX customers still awaiting repayment. Braden Perry, a former senior trial lawyer for the Commodity Futures Trading Commission, has suggested that if FTX customers recover their funds, Bankman-Fried could face "at least 70 months in prison based on his base level offense, number of victims, sophisticated means, and leadership role." If not, it was originally expected that Bankman-Fried would face at least thirty years in prison or potentially a life sentence.
According to Campbell's LinkedIn profile, he founded Zero Knowledge Consulting in February 2023. He currently holds positions as a partner at Lunaria Group and an adjunct professor at Columbia Business School. His previous roles include chief risk officer at Paxos and head of stable value products at Global Rates Trading.
