Former Binance CEO Praises Rival Crypto Exchange, but Warns It Lacks Identity Checks

The man who pleaded guilty to operating a crypto exchange without adequate anti-money laundering controls has an interesting opinion about another exchange accused of the same thing. Former Binance CEO Changpeng “CZ” Zhao recently praised Hyperliquid, one of the crypto industry’s biggest success stories of the past two years, in a preview clip from an upcoming interview. His praise came with a catch.

CZ’s enthusiasm was loaded with implication. “I would never do what they do given what I’ve experienced in my life,” he said. Hyperliquid operates as a blockchain-based perpetual futures exchange, and CZ zeroed in on something specific: the platform does not require users to verify their identities. “They don’t have KYC,” he said, referring to Know Your Customer regulations that financial platforms are generally required to follow. “They claim to be decentralized.”

The warning landed differently given who was delivering it. In November 2023, Binance pleaded guilty to anti-money laundering and sanctions violations and agreed to pay more than $4.3 billion to U.S. authorities. CZ personally pleaded guilty to failing to maintain an effective anti-money laundering program. He later served a four-month prison sentence. His endorsement of Hyperliquid, then, is less a compliment and more a dispatch from the consequences he knows firsthand.

This article was created with the assistance of AI and reviewed by our editorial team for accuracy and clarity.

Binance Paid $4.3 Billion and CZ Did Prison Time — Hyperliquid Is Running the Same Playbook

Hyperliquid is not operating in a vacuum. The pattern CZ is describing, a crypto trading venue that skips identity checks and wraps itself in decentralization language, has a documented track record of ending in federal charges. The question is not whether the model is legally risky. That question has been answered, repeatedly, in courtrooms.

In January 2025, crypto exchange KuCoin pleaded guilty to operating an unlicensed money-transmitting business. It agreed to pay nearly $300 million in fines and was required to exit the U.S. market for at least two years, according to the Department of Justice. Around the same period, BitMEX was fined $100 million for willfully violating the Bank Secrecy Act by operating without proper identity checks. Each case followed the same basic structure: skip compliance, grow fast, pay later.

CZ’s own trajectory traces the ceiling of that strategy. Binance became the world’s largest crypto exchange in part by operating across jurisdictions without consistent compliance infrastructure. The result was the largest corporate resolution in crypto history, a personal guilty plea, and a prison term for its founder. His comment that he “assumes” Hyperliquid “has good lawyers” is not encouragement. It is the sound of someone reading a familiar map.

“Decentralized” Is a Label, Not a Legal Shield, Here’s What’s Actually Running These Platforms

The decentralization argument has a structural problem. Crypto platforms often present themselves as beyond the reach of regulators by pointing to blockchain architecture, but the actual distribution of control tells a different story. On Coinbase’s Base network, for example, one company acts as the sole sequencer for transactions, collects all associated fees, and has a financial stake in the stablecoin that circulates throughout the ecosystem.

Hyperliquid uses USDC as collateral for its perpetual futures markets. USDC is a stablecoin issued by Circle, a regulated U.S. company. That single fact threads Hyperliquid into the conventional financial system regardless of how its interface is branded. Regulators looking for pressure points in any of these networks do not need to redesign their legal theory. They need to identify who controls the sequencer, who issues the collateral, and who collects the fees.

CZ’s own involvement in this space adds another layer. Despite framing Hyperliquid as something he would never replicate, he is an adviser to Aster, a platform built on a structurally similar exchange-and-blockchain model, and a holder of its crypto token. In March 2025, Aster launched its own dedicated blockchain, making its architecture more directly comparable to Hyperliquid’s. The line between the model he warned against and the one he is participating in is not as clear as his comments suggested.

Hyperliquid Just Spent $28 Million to Lobby for the Legal Framework That Could Let It Keep Doing This

The industry has not been sitting still while these legal questions accumulate. The Hyperliquid Policy Center, which describes itself as an independent organization, was funded with $28 million worth of HYPE tokens by the Hyper Foundation. Its stated goal is to advocate for a regulated U.S. path to on-chain derivatives markets. That is a significant amount of money to spend on shaping the rules of an industry that claims to operate outside traditional institutional structures.

The legislative environment is not settled. Duke Law lecturing fellow Lee Reiners has argued that the proposed Clarity Act framework could help classify Trump-linked crypto project World Liberty Financial’s WLFI token as something other than a security, effectively creating legal cover under new law. CZ’s own pardon by President Trump in October 2025 drew sharp criticism. Former Justice Department pardon attorney Liz Oyer described it as “unprecedented” corruption, citing the overlap between Binance’s business dealings and those of Trump-affiliated crypto ventures.

What CZ described as Hyperliquid’s advantage, no identity checks, no compliance overhead, the freedom that comes from claiming decentralization, is precisely what regulators have prosecuted in case after case. The difference now is that the lobbying infrastructure is better funded, the legislative environment is more favorable to crypto-aligned interests, and a president who pardoned the last person to go to prison for this is in office. The legal risk has not disappeared. It has been reorganized into a political project.