Senators investigate crypto exchange Binance after FTX collapse
Changpeng Zhao, CEO of Binance, speaks at the Delta Summit, Malta’s official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian’s, Malta on October 4, 2018.
Darrin Zammit Lupi | Reuters
WASHINGTON — A bipartisan group of senators asked Binance, the world’s largest cryptocurrency exchange and one-time contender to bankrupt crypto giant FTX, for detailed information about its business operations amid allegations of illegal practices.
Sens. Elizabeth Warren, D-Mass., Chris Van Hollen, D-Md., and Roger Marshall, R-Kan., requested a series of documents on corporate finance, compliance and risk management practices from Binance and its U.S. subsidiary, Binance .US, in a letter dated Wednesday.
“In the years since Binance’s founding, the company has faced increasingly troubling allegations regarding the legality of its operations,” the senators wrote in a letter addressed to Binance CEO Changpeng Zhao and Binance.US CEO Brian Shroder.
Binance did not immediately respond to CNBC’s request for comment.
The Justice Department launched a criminal investigation into Binance and Zhao in 2018 — the year after the company launched — amid concerns that the exchange defied US anti-money laundering laws and sanctions. The agency has not taken a decision on whether charges should be brought against the company or individual managers.
Binance has become the definitive leader in the digital currency exchange industry since FTX filed for bankruptcy and its founder, Sam Bankman-Fried, stepped down in November. Bankman-Fried was later arrested and charged with defrauding investors, making illegal political contributions and committing commodity fraud, among various other charges. Bankman-Fried has pleaded guilty in the case.
In the letter, the senators outlined the Justice Department’s allegations against Binance, claiming the company has shown a lack of transparency.
They also accused Zhao of refusing to disclose the location or device of his exchange “in what many see as a blatant attempt to evade world financial regulators, serve ‘unlicensed users’ and violate anti-money laundering laws.”
The Securities and Exchange Commission also alleged that Zhao used Binance.US as a shell company to distract US regulators from illegal activities, including that it allegedly processed at least $10 billion in payments to criminals and US sanctions evaders, the senators said in the letter.
“Mr. Zhao’s claim that Binance.US is completely independent is eerily similar to the claims made by Sam Bankman-Fried regarding the distinction between FTX US and FTX — claims that appear to be false, given that FTX US has filed for bankruptcy, users have lost access to their funds, and the new CEO has declared that it is effectively insolvent,” the letter said.
The senators requested a list of seven items, including full copies of the company’s balance sheets dating back to 2017, copies of internal anti-money laundering policies and any written guidelines for the relationship between Binance and Binance.US by March 16.
FTX’s collapse, which affected over 1 million investors, highlighted “the need for real transparency and accountability in the crypto industry,” the senators wrote.
“Binance is the world’s largest cryptocurrency exchange by volume, with over 120 million users globally, meaning it is uniquely positioned to facilitate illicit financial transactions on an unprecedented scale, putting the savings of millions of everyday users at risk,” it wrote the.
