Opinion: Joshua Chu, Hong Kong Web3 Association Co-Chairman
US President Donald Trump recently made headlines for pardoning Binance co-founder Zhou Peng “CZ” Zhou. Some commentators hail the move as a way to “clear CZ’s record and get him back in the industry,” but this misses the point that a presidential pardon does not erase guilt.
After all, judicial power is vested only in the judiciary. Only a sitting judge has the power and authority to overturn a conviction, restore innocence, and restore innocence.
In the CZ and Binance cases, the shortcut to pardon came not through judicial exoneration, but through administrative pardons, leaving criminal records and underlying wrongdoing intact. After all, only the guilty are entitled to pardon.
The current situation is not the result of an appeal in which the Department of Justice could signify consent to vacate a conviction in a hypothetical transaction. Had CZ pursued the appellate route, an impartial judge, with permission from the Department of Justice, could have reviewed the uncontested case and reversed the verdict in a procedurally sound manner, clearing his name.
Therefore, CZ and Binance’s legal teams may have made a costly and irreversible strategic mistake by seeking and subsequently obtaining a pardon directly from the president (not a judge or judicial official), cementing their status as federal convicts and potentially opening new avenues for civil liability.
Admission confirmed due to amnesty
Criminal law recognizes that crime is not a victimless abstraction. It is a conviction for a social injustice, a violation of social order, which results in actual harm to an individual or group. In the context of regulatory and financial crime, such victims range from those who have been directly defrauded to those affected by broader illegal market fraud.
Once a person is found guilty, the public record of wrongdoing becomes permanent.
During the prosecution process, the CFTC’s investigation into Binance provided a treasure trove of evidence, including a deliberate failure to implement meaningful KYC/AML controls, enabling criminal use of funds. In contrast, the CFTC’s evidence suggests that Binance induced customers to evade sanctions, and that management subsequently engaged in “cleansing” efforts to hide its U.S. users. These confessions are now incontrovertible as there were no appeals during the holidays.
This effectively increases the legal effect on parties to future civil litigation. With the conviction record established and uncontested, and the option of appeal eliminated, the plaintiff no longer needs to prove the elements of criminal liability. Civil courts in torts, fraud, and related cases are therefore likely to treat criminal convictions (and related facts) as binding, or at least highly persuasive, authority.
Related: President Trump pardons CZ: “What he did was not even a crime,” they say
The law will therefore recognize the rights of those who have been harmed, whether they are direct victims (those who have lost their funds or security, or have been harmed by illicit facilitation, such as the purchase of arms through illicit trade) or indirect victims (those who have been exposed to market, regulatory or situational harm).
It is pertinent to note that whenever a crime is committed, it represents a violation of rights and causes harm to society. The scope of these victims can be extensive, especially in cases of financial and cyber fraud, indicating that criminal and civil proceeds should be allocated to compensate victims.
Floodgates of exposure to tort liability
At the heart of tort law are important legal principles established in the following cases: Ryland v Fletcher (This principle was later absorbed into U.S. common law), specifically, any person who, in pursuit of his or her own interests, brings or stores on his or her property anything that could cause harm if leaked would be strictly liable for the consequences. Such a “no-fault” standard requires only that the risk was foreseeable and that actual harm occurred because the risk was avoided.
Binance’s internal chats and regulatory investigation revealed that executives intentionally circumvented regulatory requirements, facilitating illicit financial flows, condoning and permitting sanctioned transactions, and intentionally enabling risk-taking actions, according to court records and disclosures.
These admissions (embodied by the foregoing pleadings) satisfy both the traditional and modern sense of foreseeability, which is the cornerstone of tort claims under common law jurisdictions.
True scope of exposure to civil liability
The effects of previous guilty pleas (and accompanying confessions) are solidified by subsequent convictions, unchallenged by vacation appeals, and deeply permeate multiple layers of society and markets.
These raids could include victims of terrorism and state-sponsored violence, such as survivors and families of the October 7 terrorist attacks and music festival tragedy, and civil lawsuits are already underway alleging that Binance’s intentionally lax controls and facilitation of illicit payments allowed terrorist organizers to finance and carry out such devastating attacks.
In addition to them, they also include victims of cyber scams and scams, including consumers whose cryptocurrencies were lost or laundered through Binance, even after regulators declared such platforms suspicious.
Finally, claimants seeking legal redress, demanding the appropriate distribution of settlements to crime victims as required by law, will be another potential candidate for the growing list of claimants. The series of claims reveals not just individual economic losses among victims, but broader, cascading harms, each rooted in facts of wrongdoing or omission, now amplified through strong conviction records, subject to litigation, but (now that pardons are in place) outside the scope of appeal.
Effect of amnesty
The fact remains that a convicted person will no longer be able to appeal after a pardon, since a pardon is an executive act that forgives a crime and eliminates the remaining crimes. [criminal] Since it is a punishment and acceptance of a pardon means acceptance of guilt, grounds of appeal based on a challenge to the conviction itself are defeated. Each of these victim groups will therefore have their rights and remedies strengthened by their undisputed confessions, solidified by their convictions and pardons, which in turn pave a plausible path to recovery that could reshape the risk profile of Binance and its ecosystem and the future of reparations for crypto-related wrongdoing.
By accepting a pardon, CZ would effectively avoid judicial proceedings that could remove or challenge proven criminality.
The price of uncertainty for certainty
The immediate reaction to CZ’s presidential pardon was a sudden spike in BNB prices, no doubt reflecting the complex relationship between the two. Speculators celebrated the removal of criminal legal restrictions and predicted a period of deregulation for Binance, with optimism fueled by the belief that the brand’s founder could return to public leadership and return the business to its “good old days” ways.
However, this increase could prove fragile against the backdrop of unresolved civil liability and reputational risks (risks that cross US borders, which on the one hand depend on the CFTC’s findings and, on the other hand, may give little positive weight to pardons).
While a pardon would certainly preclude a criminal conviction, it would still cement CZ’s conviction and reaffirm that wrongdoing did occur, which could open the floodgates to a wave of civil lawsuits as a result.
Additionally, a U.S. presidential pardon has no legal effect outside of U.S. borders and does not protect individuals from prosecution under foreign or international law. Other jurisdictions retain the right to use the CFTC’s evidence to investigate or prosecute the same underlying conduct if their laws are violated or the conduct constitutes an international crime. That means pardoned people can still face legal consequences abroad, regardless of their status in the United States.
The core risk for BNB holders is that Binance’s stance could change suddenly and rapidly due to rising litigation costs, assets that can be seized in different jurisdictions, reputational impact, and possible regulatory exemptions. If such a threat materializes, volatility could become the norm and put downward pressure on BNB as markets struggle to price in changes in the headlines, negating the tentative gains sparked by the amnesty news.
Opinion: Joshua Chu, Hong Kong Web3 Association Co-Chairman.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.