The founder and CEO of Binance, Changpeng Zhao, moved his company away from China in 2017 when the country banned cryptos and ICOs. However, recent events and new evidence suggests that the Chinese government maintains a hold on the business executive and has far more control over the Binance exchange platform than one could comprehend.
Let’s look at the flags that were raised, and the online investigation that led us to some surprising discoveries.
In October 2019, some peculiar discussions hit the crypto sphere when CZ confirmed on his Twitter that users could buy crypto through WeChat and Alipay with cash in China. Both WeChat and Alipay have always had close relationships with the Chinese government, in fact, WeChat has been subsidized by the government since its creation in 2011.
In response, CZ seemed to completely recoil. First, he retweeted an explanation from another twitter user ‘TruthSeeker’ which ended in the eerie words, “what can Binance do now? It’s best if they just stay quiet. Let it blow over. So, don’t ask CZ any more questions.”
Then he gave out his own comment on Twitter in which he stated, ““some things are better left unsaid. Recommend no more news like these, for the sake of the people, our industry (and your business).”
This strange, almost threatening response sparked major debates in the Twitter community and betrayed CZ’s usually calm and confident demeaner.
Following this flurry of action, the generally talkative CEO went unnaturally quiet. Soon after, he deleted all his tweets regarding AliPay, WeChat, and the correspondence that followed.
It was clear that CZ had upset the state-endorsed companies, and ultimately the state itself and was doing his best to cover the tracks.
Many blamed his seemingly over-exaggerated response on Binance’s recent strategic investment in China, but others felt it pointed towards a connection between his company and the country that went beyond investments. After some light digging over the past few weeks, that connection came to light.
Step One: Digging for Evidence
Those deeply integrated in crypto news may recall the 2017 case in Hong Kong between Sequoia Capital China (SCC) ventures and Zhao. SCC claimed that the Binance founder had been guilty of violating their exclusivity rights when Zhao began discussions with another investment group.
Ultimately, SCC lost the case. But what is more interesting is what was found while reading through the official online documentation of the case.
Multiple times in the document, the term ‘BitDJ Limited’ is referred to as the previous name for Binance or another term for Binance in its early stages.
Some examples are as follows:
“It was signed by SCC of the one part, and the defendant and Ms Yi He on behalf of BitDJ Limited (“BitDJ”) of the other.”
And “a Cayman Islands Company (according to the plaintiff later known as Binance Holdings Limited) … The Cayman Company would acquire 100% equity interests of BitDJ Godogaisha and establish a Hong Kong company which would acquire all the assets and business of BitDJ.”
But this was not the only time the phrase BitDJ cropped up during my research. My next step was to utilize the Cryptoversal affiliate program page which allows users to find information about various exchanges. Looking closely at the Binance page, a few pieces of information stood out.
Firstly, the company name was registered under non-other than BitDJ (Shanghai Biji Enterprise Management Consulting Co. Ltd), and secondly, one of the two contact emails provided was Binance at Bijitech.com.
Both BitDj and Bijitech are noticeably non-Binance terms that kept cropping up, so the digging had to continue.
Step Two: Looking into BitDJ
Using the Whoxy domain search engine, a quick domain keyword search for BitDJ (do) pulls up something very interesting. It shows that the registrar for two of the seven domain names, binancechain.tech and binancechain.site, is none other the Alibaba Cloud Computing Ltd, the Chinese cloud computing company and subsidiary of Alibaba group.
It is the first step leading to the conclusion that Binance may be using Alibaba cloud services, which gives the platform grounding in China.
Step Three: Looking into Bijitech
To find Bijitech.com, I started off with a quick google search. Unsurprisingly, the site no longer exists. However, searching for the domain name on web archive brought more success and revealed more information.
It led me to the former website’s page, all in Chinese:
Here is where I thanked god for Google translate and used it to get a rough translation which led right back to Alibaba.
A google translation of some of the information on the page states:
Alibaba Cloud Strategic Cooperation
Stable, reliable, and scalable online database service. Provides a complete set of solutions in disaster recovery, backup, recovery, monitoring, migration, etc., to completely solve the troubles of database operation and maintenance.
While another translates as:
Based on Ali's big data computing capabilities, through the industry's leading risk decision engine, it solves the threat of fraud in key business links such as corporate account numbers, activities, and transactions, and reduces corporate economic losses.
It is clear this Bijitech system was heavily reliant on Alibaba’s web hosting services. And considering Binance’s given email address is email@example.com, it doesn’t take a genius to understand Binance and Bijitech are probably one and the same.
The deleted web page is a bad cover up for a company who do not want the public to know where they are storing the tons of KYC data that they have in their system, but all it takes is some online investigation to join the dots.
Conclusions: Alibaba and the Chinese government?
The question remains, why is a big deal if Binance uses Alibaba web hosting services? And why do they go to such extremes to cover it up?
It probably has something to do with the increasing involvement between Alibaba and the Chinese government. In September 2019, the Financial Times reported that the government of Chinese tech hub of Hangzhou assigned officials to some local companies, including Alibaba.
It was the latest example of the tightening of ties between the state and Alibaba. In fact, since 2012, the Communist Party of China has had a Group Party Committee in place in the company and has over 2,000 party members as Alibaba employees.
Relations between big Chinese companies and the government is a common practice in the country. The Chinese government often grants big government projects to companies that play by their rules. An example is in late 2017 when it was declared that China’s first wave of open Al platforms would rely on Alibaba for smart cities, providing the company with long-term business and profit in exchange for Alibaba tightening up their regulations on production of counterfeit products.
It is not hard to understand why, as time goes on, the Chinese government want even stronger ties to Alibaba, especially if they are the web host of Binance. Remember, whoever hosts the Binance exchange also hosts of hundreds of thousands of Chinese and international’s sensitive personal information from the intense KYC demands of the exchange.
China has been vocal about their dislike of cryptocurrency but their approval of Blockchain technology, so quietly having a foothold in the largest exchange platform in the world seems exactly the right move for a government that wants to stay on top of technological advancement, maintain control , and gather as much information as possible.