On November 21, 2019, the cryptocurrency/blockchain news outlet The Block released a report written by Celia Wan stating that “Binance offices in Shanghai shut down following police raid”.
Since then, Binance and CZ have responded denying The Block’s claims. The Block also recently made new posts updating the original claims.
This issue has spurred debate amongst the cryptocurrency community with people arguing for both sides. It has also created controversy regarding The Block’s validity and Binance’s office situation.
Why I think it’s important to write this
- Summarize the entire series of events — as it is quite controversial, confusing, and has caused a considerable market reaction.
- Offer my thoughts on The Block’s claims and arguments from a perspective that understands China
*I’ve spent most of my life in China and I’d like to think I have an understanding of the system
- Point out exactly from an unbiased, analytical point of view, which claims are I think are valid, questionable, or just flat out wrong.
Disclaimer: I will strive to present everything in this article from an unbiased point of view. I’d like to start by sharing my personal opinions on each first as a disclaimer of sorts (non-fact related) so readers can have some understanding of my relationship with The Block and with Binance.
Reminder: all items in this analysis are my opinion and only based on the evidence I have seen in front of me, which is all available to the public.
My relationship with each: The Block and Binance
The Block: I have followed The Block for a while— I’d say since their beginning. I do think they provide good and quick news that does cover most needs for understanding what is going on in the blockchain space.
I have only followed Mike Dudas, Frank Chaparro, and Larry Cernak (all working at or with The Block). I do not know them personally. I do think they have the best interests in mind for reporting. But, I do think they have made some missteps regarding this article in question.
However, contrary to their naysayers now, I do not think they are paid or sponsored by people to write negatively on Binance. This is just my subjective feeling. I have no facts to back this.
Binance: I have spoken with Binance’s CEO, Changpeng Zhao (CZ) on a few separate occasions. We have talked in interviews and have spoken quite deeply about the industry, markets, and business in general.
I have also followed his activity online very closely, as it is my job to do so — coming from a blockchain media and consultancy company myself. My opinion is I think he is as transparent as it gets when it comes to running a cryptocurrency exchange.
Binance as a company: I know quite a few of Binance’s C-suite executives on a personal basis (prior to them even joining Binance), I know many Binance team members too. I have reported on Binance and I have done interviews.
I have never had a single monetary transaction with Binance or CZ.
How it Started
This entire debacle started when The Block shared the below article on November 21, 2019.
To summarize: The Block reported that Binance’s offices in Shanghai were “shut down” due to “police raids” and they had multiple sources confirming this story.
This was around 2AM in Asia. I recall seeing it posted the moment it went up. When I woke up around 8AM, I saw CZ and Binance had responded, a few hours later, denying the claims with:
No police, no raid, no office. Hope you didn’t pay to read that FUD block.
Bitcoin prices suffered an over 10% drop following this news. I do not think that this news alone caused the drop in BTC price, but, I do think it contributed a little. This is besides the point of this article. I digress.
The Block’s Response to Denials
Following Binance’s denial, The Block’s key public figures began responding. Mike Dudas, Frank Chaparro, and Larry Cernak all stood with their original reporting.
Here are some of the responses:
CZ Responds to The Block’s firm stance
As The Block’s team continued to stand firm on their reporting, CZ continues to respond, denying that Binance had offices in Shanghai, and arguing that using the terms “police raid” was completely wrong as it did not happen.
He states that without the terms “police raid”, there would be no article or headline.
The Block’s Updated Response
Here comes the important part I’d like to analyze. The Block’s Frank Chaparro released an article one day after the whole debacle started, with updated findings. I will be analyzing with comments on this part.
I will mark out each part with Valid, Questionable, or Wrong and an explanation to follow.
Again, these are my opinions and thoughts on the matter. I will remain an unbiased third-party.
WRONG: Updated Terms used in New vs. Original Article
The Block updated their original article. There is a key difference, the title has been changed.
Original: “Binance’s Shanghai office shut down following police raid, sources say”
Updated: “Binance’s Shanghai office shut down following visit by authorities, sources say”
I’ll give a little credit to The Block, because they did mention changes in the updated article. But, I do have to say using the term “police raid” in the beginning without fact-checking is a huge misinterpretation.
Also, in China, it’s unlikely police “raid” exchanges like you’re picturing because the word “raid” was used. “Raid” is a very serious word to use.
It conveys the image of SWAT team members with shields entering a building. Even if police were involved, this is not how it would have been handled in China. At most, a few authorities would walk in to check on the premise and office.
Soon after, Larry Cernak of The Block, tweeted this after receiving backlash.
This I think is the most irresponsible part of this whole ordeal. If the police being involved was questionable, The Block shouldn’t have reported to the public with the words “police raid”.
On the Binance Shanghai Office Claim
The Block stood by their claims with updated information:
The Block’s own sources and public information demonstrate that CZ’s statement is false. In fact, it appears that there were two Shanghai offices at which Binance employees worked during the past two years.
WRONG/QUESTIONABLE: “In addition to our own sources”
I understand protecting sources. But, this means nothing to the public. Anybody can claim anything with “anonymous sources”. Nothing more to say about that.
QUESTIONABLE: “and photos of the office we obtained”
Honestly, to me, it looks like any other office in China or the world. I don’t see any hard evidence that these are in any way related to Binance. But, there isn’t anything that proves it’s not either.
With such a firm stance from The Block, I was honestly expecting to see clear evidence that there was a Binance office that existed in Shanghai.
QUESTIONABLE: “China’s media site Caijing.com published an article saying it visited one of the Binance Shanghai offices as recently as Oct. 29”
I’ve reviewed the Caijing.com article (in Chinese), and here’s a summary translated:
The Block recently reported Binance’s Shanghai office, forcing ~100 employees to work remotely or in Singapore.
October 29th, Caijing visited Binance’s office in Shanghai to investigate, due to a Binance employee who quit. The mentioned office is at Zhonghai Huanyu Tower A Building 26h Floor.
While visiting, we saw a person with a black hoodie with a Binance logo walk into the said building.
On November 22, we went back to the office and it was empty.
The Block cited Caijing as a source claiming that the Binance office exists is questionable at best.
If you look at the above photo, there is still no evidence in the photo that proves this office was, in any way, related to Binance. They even stated: “a man with a black hoodie and Binance logo walked in while we were there”.
This is still completely hearsay and isn’t hard evidence.
QUESTIONABLE: Caijing’s article also shows a company registration for a company called BABI, which they claim is Binance.
This screenshot of a company called “BABI Finance” means nothing. No way to confirm this is related to Binance unless an employee or government employee steps out to prove it.
In China, it’s very easy to register a company or “shell companies” which use other people’s names.
Usually, there are partners/shareholders and there is a legal representative. The partners/shareholders are the owners of the company andd the legal representative is the one who shoulders all the legal responsibilities of the company.
The two can be separate. And in this case, if we look up the information for this company “BABI”, it’s impossible to tell if it has any relation to Binance.
The summary and explanation from The Block’s Frank Chaparro
Here is the explanation from The Block’s Frank Chaparro in the updated article titled Setting the record straight on our Binance reporting
The eyewitness is a Binance employee who we cannot identify because we agreed to communicate “on background” — that is, to be quoted only as an anonymous source. This person has been a reliable source to The Block for the past several months, and has accurately confirmed multiple stories related to Binance. Following our initial reporting, another source corroborated that officials had visited one of the offices prior to the shutdown. Still, following publication, other vetted sources have questioned the veracity of the word “raid,” as used in the report. We’ve updated our previous story — and headline — to reflect this ambiguity.
QUESTIONABLE: “Anonymous source”
Honestly, I want to believe The Block. But, this means nothing to the public. It’s still hearsay. The statement from The Block’s that the source “accurately confirmed multiple stories relate to Binance” doesn’t mean much either.
QUESTIONABLE: “Following our initial reporting, another source corroborated that officials had visited one of the offices prior to the shutdown.”
It’s good that The Block, after all the backlash, used the words “officials had visited” rather than “police raid”. I’m glad they did make the update. But, the damage really has been done.
Again, this is still from “another source” and there still isn’t any hard evidence produced here.
I’m tired of writing what others should be doing in the first place and I have to go out for meetings, so I’ll keep this short:
Evidence that Binance had an office: QUESTIONABLE
The photos presented don’t show much to prove Binance had an office operating in Shanghai still. The “sources” and evidence presented are questionable at best. I was imagining photos would show emptied out offices in Shanghai with Binance papers, documents, and equipment all over the place.
With “100s of employees”, not one could be contacted for a quote. Not one photo of them leaving.
With “authorities visiting the office”, not one photo or bit of evidence this even happened.
Using the words “police raid” before facts were checked: WRONG
Really irresponsible to use the words “police raid” in the beginning without fact-checking to make sure first.
Good luck to both sides figuring this issue out.