Cryptocurrency Giant Binance Sues Forbes, Driving New Attention To Article About Binance's Corporate Structuring

from the crypto-streisand dept

Binance is one of, if not the, biggest cryptocurrency exchanges around. Its famously vocal CEO Changpeng Zhao (known as CZ) has positioned himself as a supporter of free speech, and even sees cryptocurrency/blockchain as a key element in that. Frankly, Binance is a fascinating company that I think is working on a some very interesting projects. And that's why it's incredibly disappointing to see the company sue Forbes over an article published last month, using lawyer Charles Harder (as you'll recall, Harder was the lawyer in the case against us and has a reputation for filing sketchy SLAPP lawsuits to try to stifle the media when it criticizes the rich and famous.)

Admittedly, CZ's support for "free speech" often seems to lack an understanding of what actual free speech means. He has (falsely) said that freedom of speech does not cover lies, which is simply incorrect in the US context. Of course, not all lies are protected. There is a very narrow slice that constitutes defamation that is not protected. But most lies and false speech is very much protected under the 1st Amendment and thus, contrary to CZ's belief, part of "free speech."

Given all that, I figured at the very least that Binance and CZ would have a stronger case against Forbes. But it's staggeringly weak. It appears to be a fairly classic SLAPP suit, designed to try to silence the media and suppress content that could be interpreted to make Binance look bad. The article, written by Forbes staffer Michael del Castillo, discusses a presentation that Forbes got a hold of, that the article claims was presented internally within Binance, detailing ways in which the company might avoid US regulators to offer highly leveraged cryptocurrency derivatives trading. The article mostly focuses on the details of the presentation, and then highlights how some moves that Binance has made appears similar to what is suggested in the presentation.

It is true that the Forbes article does not paint Binance in a positive light, and certainly raises questions about the company's actions. But to be defamatory there needs to be blatantly false statements of fact. And while the lawsuit does put out a list of 20 supposedly defamatory statements, some are clearly opinion, some are clearly taken completely out of context, and many are opinions based on disclosed facts -- all of which would make them not defamatory. For example, the very first statement that the lawsuit says is defamatory is:

Binance is pursuing an “Elaborate Scheme To Evade Bitcoin Regulators.”

But, note that "pursuing" is not put in the quote. Because the article doesn't directly say that. It notes that there was this presentation, which it shows a screenshot of and quotes extensively, and then notes the actions that Binance has taken that match what was in the document. But the factual claims of reporting on the document existing and what it says, as well as reporting on Binance's actual actions within the US don't seem to be denied.

Binance argues in the lawsuit that the guy who created the document, Harry Zhou, "is not and never was an employee of Binance." But the Forbes article notes that Binance's chief compliance officer Samuel Lim had emailed Forbes to confirm that Zhou had been a Binance employee. Based on that, Forbes certainly had reason to state that in its article. Bizarrely, the lawsuit says that that statement (the one about Lim emailing Forbes and confirming that Zhou had been an employee) is itself defamatory. That seems like a pretty straightforward claim. And, sure, if it turns out that Lim never sent any such email, then there's maybe a legit case here, but that would be... surprising. Also, the article presents further evidence that Zhou and Binance are connected in noting that the American Binance entity, Binance.US's "initial documents" (I assume they mean incorporation documents) showed that Binance.US shared an address with Zhou's previous company, Koi Trading. In fact, it was reported that Binance.US's original documents said that its address was not just at the same location as Zhou's Koi, but listed as "c/o Koi Compliance." It's possible that Zhou was never technically an "employee" of Binance, but there's enough evidence presented that shows that saying that is simply not defamatory.

Many of the other supposedly defamatory statements are either about Zhou being an employee, or simply repeating what was apparently in the document that Forbes got ahold of. Then you have some statements that are clearly opinion, such as:

“[Binance is] reminiscent of Amway-style multi-level marketing organizations.”

That line is also out of context. It elides the "somewhat" before "reminiscent" and the full statement is clearly opinion:

Binance’s novel approach, which is somewhat reminiscent of Amway-style multi-level marketing organizations, has created loyalty among its customers, and solved the nagging problems of retention experienced by many exchanges.

That's not defamatory. Or how about this:

“[T]here is speculation that the FBI and the IRS may be investigating” Binance.

That's not saying there absolutely is such an investigation -- it just notes that there is speculation of such an investigation.

Perhaps more importantly, nothing in the complaint even remotely tries to get over the actual malice standard, which is clearly required here, as the Supreme Court has held that it also applies in defamation cases brought by companies over issues of public interest. Yet, this is the only attempt to get over the actual malice standard that I can find in the complaint:

To the extent that actual malice is required to be pleaded and proven, Defendants made the false statements either knowing that the statements were false or with reckless disregard for the truth.

That's... just stating what the actual malice standard is. The complaint presents no real evidence that Forbes knew the report was false (indeed, it appears the company continues to stand by the report. The reporter highlighted the reasoning for all of the arguments, and disclosed what the reasoning was based on. This is the opposite of actual malice.

Frankly, it's surprising just how weak this all is. Especially given that filing this lawsuit is only going to drive that much more attention to the original Forbes article, and what's written in it. Filing this lawsuit seems like the ultimate Streisand Effect, only serving to bring more attention to the claims in the article, rather than refuting any of them.

Oh, and of course it's important to note that New Jersey, where the lawsuit has been filed, has no anti-SLAPP statute at all. Every state needs a strong anti-SLAPP statute, and we need a federal anti-SLAPP law to stop these censorial lawsuits designed to stifle free speech.

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Filed Under: actual malice, anti-slapp, changepeng zhao, charles harder, cz, defamation, free speech, harry zhou, michael del castillo, slapp, streisand effect
Companies: binance, forbes


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  1. identicon
    Anonymous Coward, 25 Nov 2020 @ 11:34am

    Every state needs a strong anti-SLAPP statute,

    we need a federal anti-SLAPP law to stop these censorial lawsuits designed to stifle free speech.

    Both of these are true, and independent of each other. Federal anti-slapp for federal cases (hey there, Diversity Jurisdiction, nice to see you paying attention!), and each-state anti-slapp for state cases.


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