Binance Accused of Money Laundering, Criminal Activity by Senators; Bitcoin Retreats
Bitcoin retreated overnight on Thursday as three US senators launched an investigation into Binance, the world’s largest cryptocurrency exchange, for a series of alleged illegal activities. The news came on the heels of major crypto banks Silvergate (SI) postpones its annual results.
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In a scathing March 1 letter to Binance CEO Changpeng Zhao and its domestic affiliate Binance.US, Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.) and Roger Marshall (R-Kan. ) Binance under investigation for possible sanctions evasion, money laundering and unlicensed money transmission.
“The companies’ apparent attempts to evade enforcement of anti-money laundering laws, securities laws, information reporting requirements and other financial regulations cast serious doubt on the stability and legitimacy of Binance and its related entities, and on your commitment to your customers,” wrote the senators.
Binance is the world’s best crypto exchange by volume and has 120 million users globally. Listed Coinbase Global (COIN) ranks second by volume, followed by Kraken, which recently paid a $30 million settlement to the SEC.
The Senate letter alleged that Binance facilitated at least $10 billion in money laundering and sanctions evasion for criminal and rogue states. And the senators accused the private exchange of “obscuring even the most basic financial information.”
Binance alleged fees
The allegations say that Binance avoided US regulators by operating Binance.US as a “de facto subsidiary.” Affiliate Binance.US is registered with the Treasury Department, but Binance is not licensed to operate in the United States. According to 2019 financial documents, Binance’s Cayman Islands holding company holds Binance.US customers’ digital wallets.
During three months in early 2021, the exchange engaged in suspicious, FTX-like activities. The company moved $400 million from its Binance.US account at Silvergate Bank to an account held by “a trading firm managed by Binance CEO Changpeng Zhao.”
It is unclear whether these funds belonged to US customers.
Meanwhile, the allegations say the company has facilitated at least $10 billion in laundered crypto to criminals and sanctions evaders since its founding, the letter claims. “It appears that money laundering is central to Binance’s business strategy – so much so that Zhao himself has instructed his so-called ‘compliance’ team to significantly weaken the platform’s anti-money laundering controls, or do away with them altogether,” the senators wrote, citing a Reuters- report from January last year.
This reportedly included Binance attempting to recruit customers in seven countries, including Russia and Ukraine, deemed to be at “extreme” risk of money laundering. Since 2018, the exchange has been the target of ongoing investigations by the Department of Justice for conspiracy to launder money and violations of criminal sanctions, the letter noted.
The senators asked Binance and its related entities to submit financial and internal documents and respond to questions by March 16, 2023. This includes balance sheets of Binance and subsidiaries dating back to 2017, the percentage of US-based users and its internal risk and anti-money laundering of money. guidelines. The senators also want more details about the relationship between Binance and Binance.US, as well as a list of all US-based platforms that have used the company’s services at any point.
Bitcoin price
Bitcoin fell nearly 4.5% to an overnight low of $22,000 following the release of the letter. Meanwhile, ethereum erased 4.2% of its price, falling to a low of $1,550.
Shares in Coinbase fell 4.7% in premarket action. Silvergate rose 2.1%, after collapsing more than 57% on Thursday.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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