Crypto: Big cloud over the world’s largest trading platform
It’s a big fish that’s now in the sights of regulators looking to monitor the fledgling crypto industry.
And it is certain that the subtle message that the marketing police want to send – no actor is immune – will be heard loud and clear. Binance, the world’s largest cryptocurrency exchange by volume, is under investigation by the Department of Justice (DoJ).
The federal agency is investigating whether Binance.com violated US money laundering sanctions. In late 2020, the DoJ asked Binance to submit internal documents related to how the firm ensures that users of its platform do not launder money, Reuters reports.
Prosecutors want communications from CEO Zhao
The DoJ also requested personal communication from CEO Changpeng “CZ” Zhao, the news agency said, citing a written request. In particular, the federal investigators want Binance to pass on to them the exchanges between Zhao and 12 other executives and partners regarding the detection of illegal transactions.
The DoJ was looking for all company records with instructions that “documents be destroyed, altered or removed from Binance’s files” or “transferred from the United States,” Reuters wrote.
“As is well documented, regulators around the world are reaching out to all major crypto exchanges to better understand our industry. We work with agencies regularly to address any outstanding issues,” a Binance spokesperson said in an emailed statement.
“Binance has an industry-leading global security and compliance team that boasts more than 500 employees worldwide. Our team includes professionals with regulatory backgrounds, senior investigators from renowned blockchain analytics firms, and law enforcement agents who have led some of the largest investigations into cybercrime. “
The DoJ did not respond to a request for comment.
CZ, who is a Canadian citizen, appeared to confirm the investigation on his Twitter account.
“Another story today about a crypto company receiving an inquiry from a regulator,” the billionaire posted on September 1. “A request to VOLUNTARILY share certain information back in 2020, which we did. Important for the industry to build trust with regulators. “
He added that his chat messages are “semi-public anyway.”
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In another message posted a little later, Zhao insisted on transparency.
“Stay ahead, be transparent,” he said.
The crypto-billionaire has received support from social networks who are particularly happy that he never shies away from talking about Binance for better or for worse.
“Just the facts 💪💪 #Binance #BNB,” one Twitter user commented.
“Binance is coming for the bad actors in the crypto space,” another user added.
Binance Pushes Back Against Accusations
CZ has built a reputation as an open boss in the industry. He regularly engages with crypto fans and critics on social media and is very vocal in pushing the industry to be more transparent.
The DoJ investigation is part of the Bank Secrecy Act, whose purpose is to protect the US financial system from illegal interference. Companies subject to a Bank Secrecy Act must be registered with the US Treasury Department’s Financial Crimes Enforcement Network.
Last June, Reuters reported that Binance processed $2.35 billion in transactions stemming from investment scams, hacks and the sale of illegal drugs. The transactions must have taken place between 2017 and 2021, before the platform took measures to combat money laundering.
The news agency pointed to the hacking of Eterbase, with some of the proceeds laundered through Binance by the North Korean hacking group Lazarus, and Binance’s ties to the Russian-language drug cartel Hydra.
Binance reckons that only a very small percentage of crypto transactions involve illegal activities. It points to a report by blockchain analytics company Chainalysis, according to which 0.15% of all transactions made with cryptocurrencies in 2021 were associated with some form of illegal activity.
“Crypto is incredibly transparent, infinitely more so than the traditional cash economy, and this is well documented. So you’re telling us where the real problem is regarding money laundering?” Binance responded to the investigation in a blog post.
The Securities and Exchange Commission is also investigating Binance. The federal agency is trying to determine whether Binance Holdings violated securities-related rules when the firm launched its original BNB token as part of an initial coin offering (ICO) five years ago.
