Binance CEO Changpeng "CZ" Zhao urged employees not to trade FTT tokens while due diligence is ongoing in Binance's deal to acquire competitor FTX.

"As soon as I finished the call with SBF yesterday, I asked our team to stop selling as an organization," he wrote. "Yes, we have a bag. But that's ok. More importantly, we need to hold ourselves to a higher standard than even in banks."

Zhao posted a screenshot of a note sent to all Binance employees on Twitter Wednesday morning after a copy was shared with The Financial Times. On Tuesday, Zhao and FTX CEO Sam Bankman-Fried announced that Binance had submitted a letter of intent to acquire FTX. But the deal now depends on the outcome of Binance's due diligence.


"If you are not directly involved, don't ask," Zhao wrote. "We have a good team handling it. Things will play out."

He appeared to be referring to rules that ban employees at financial institutions from executing trades on material non-public information—more commonly referred to as insider trading.

A textbook example includes former Enron CEO Jeffrey Skilling, who was convicted in 2006 for hiding the company's troubles while he dumped his own shares. There have been similar incidents at crypto firms and this year federal regulators have started bringing cases against people.

But the industry has been prickly about using the term "insider trading," since it implies that crypto assets are or should be treated like securities. In fact, former OpenSea executive Nate Chastain has made that point central to his defense. Earlier this year the FBI and Department of Justices charged him with wire fraud and money laundering for alleged trades he made using insider knowledge of which NFT collections were going to be featured on OpenSea.


In July, the justice department charged former Coinbase employee Ishan Wahi, his brother Nikhil, and their friend Sameer Ramani with conspiracy to commit wire fraud by using insider knowledge of upcoming Coinbase listing announcements. It's likely connected to the company's announcement in April that it was changing its listing policy.

Zhao's note to employees also stressed that the news "is not good for anyone in the industry," running counter to the many snarky reaction memes that are still making the rounds on Crypto Twitter.

The deal could increase attention from regulators, he wrote. For a long time, Zhao famously maintained that because Binance doesn't have a headquarters, it wasn't in any country's jurisdiction. But his tone has since changed. Binance recently sought a license to operate in Singapore and said at the Web Summit event in Lisbon last week that, "Actually, the U.S. regulators are pretty good."

If the deal to acquire FTX goes through, Binance, which is already the largest crypto exchange by volume, will be an even bigger target for regulators. But CZ warned his employees against victory laps.

"Do not view it as a 'win for us.' User confidence is severely shaken. Regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get," Zhao wrote. "And people now think we are the biggest and will attack us more."

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