• A Forbes report said Binance was planning to set up a "Tai Chi entity" to protect its operations from regulatory scrutiny in the U.S
  • Changpeng Zhao said the exchange always operated within the boundaries of the law
  • He said the allegation was based on a third party document not written by a Binance employee

Binance CEO Changpeng 'CZ' Zhao has denied allegations that the cryptocurrency exchange set up its U.S. arm to sidestep regulations.

Forbes, on Thursday, reported that it obtained a leaked "Tai Chi" document outlining the company's plans to circumvent financial regulations in the U.S.

"The statements and accusations in the article are incorrect," Zhao said on Twitter, noting that the Forbes article was based on a third-party document that was not produced by any former or current Binance employee.

"Anyone can produce a 'strategy document' but it does not mean Binance follows them," he added.

The Forbes article claimed that the leaked document showed Binance intended to set up a "Tai Chi entity" in 2018 to protect its operations from the country's regulatory scrutiny. It said the U.S. operation would distract the regulators with "feigned interest in compliance," while measures would be taken to move the revenue moves from the U.S. operation to the parent Binance company in the form of licensing fees.

"All the while, potential customers would be taught how to evade geographic restrictions while technological work-arounds were put in place," the Forbes article said.

Zhao tweeted that Binance always operated within the boundaries of the law and this was reflected in its many international exchanges such as Binance U.S, Binance Korea and Binance Singapore. "Binance has always approached every location with proper licensing and applications."

Zhao also disputed claims that the exchange is trying to circumvent regulations, citing its partnership anti-money laundering/countering financing of terrorism (AML/CFT) tools and vendors like Ciphertrace and Refinitive.

The alleged author of the Tai Chi document is Harry Zhou, who had a history of launching U.S. versions of Chinese companies, the Forbes report said. In 2018, Zhou worked for Huobi U.S., another cryptocurrency exchange. 

The article also said the document is being circulated in law firms and accounting firms associated with Binance. "There is speculation that the FBI and the IRS may be investigating," the publication added.

BItcoin A picture taken on Feb. 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the 'Bitcoin Change' shop in the Israeli city of Tel Aviv. Photo: JACK GUEZ/AFP/Getty Images