Binance Executives’ Texts, Documents Show Plan to Avoid U.S. Scrutiny – WSJ

March 5 (Reuters) – Binance, one of the world’s largest cryptocurrency exchanges, developed a plan to avoid the threat of prosecution by U.S. authorities when it launched a U.S. unit in 2019, the Wall Street Journal reported on Sunday.

Any lawsuit by US regulators, which had signaled a coming crackdown on unregulated offshore crypto players, would be like “nuclear fallout” for Binance’s business and its officers, the WSJ said, citing a Binance executive’s warning to colleagues in a private chat in 2019.

The report is based on messages and documents from 2018 to 2020 reviewed by The Wall Street Journal as well as interviews with former employees.

Binance, founded in 2017, and Binance.US are more intertwined than the companies have disclosed, mixing employees and finances, and sharing an affiliated entity that bought and sold cryptocurrencies, the report said.

It noted that Binance.com mainly operated from hubs in China and Japan, but a fifth of its customers were based in the United States. Binance.US is based in San Francisco.

Binance developers in China maintained the software code that supported Binance.US users’ digital wallets, potentially giving Binance access to US customer data, the WSJ reported.

Since 2020, the Department of Justice and the Securities and Exchange Commission have been investigating Binance’s relationship with Binance.US, the report said, citing subpoenas and people familiar with the matter. If US regulators determine that Binance has control over its US entity, they could demand the power to monitor all of Binance’s operations.

In an email to Reuters, a spokesperson for Binance said, “we have already acknowledged that we did not have adequate compliance and controls in place during the early years … we are a very different company today when it comes to compliance .”

Binance.US, the SEC and the DOJ did not immediately respond to Reuters requests for comment.

Binance is under increased scrutiny as three US senators this week asked the giant cryptocurrency exchange and Binance.US for information about its regulatory and financial compliance.

Reuters has reported that Binance.US was created as a de facto subsidiary in 2019 to draw the scrutiny of US regulators away from Binance.com.

Reporting by Akriti Sharma in Bengaluru; Editing by Richard Chang and Diane Craft

Our standards: Thomson Reuters Trust Principles.