U.S. sought records on Binance CEO for crypto money laundering probe

Content of the article

LONDON – US federal prosecutors have asked Binance, the world’s largest cryptocurrency exchange, to provide extensive internal records on its anti-money laundering controls, along with communications involving its CEO and founder Changpeng Zhao, according to a written request from end 2020 as seen by Reuters.

The Money Laundering Section of the Justice Department asked Binance to voluntarily deliver messages from Zhao and 12 other executives and partners on issues including the exchange’s detection of illegal transactions and the recruitment of US customers. It also searched for any corporate ledgers with instructions that “documents must be destroyed, altered or removed from Binance files” or “transferred from the United States.”

Advertising 2

Content of the article

Content of the article

The December 2020 request, which was not reported previously, was part of a Justice Department investigation into Binance’s compliance with U.S. financial crime laws that remains pending, four people familiar with the investigation said. .

US authorities, people said, are investigating whether Binance has violated the Bank Secrecy Act. This requires cryptocurrency exchanges to register with the Treasury Department and comply with anti-money laundering requirements if they engage in “substantial” business in the United States. The law, designed to protect the US financial system from illicit funding, provides prison terms of up to 10 years.

Reuters failed to establish how Binance and Zhao, one of the most prominent figures in the cryptocurrency industry, responded to a request from the department’s criminal division.

Advertising 3

Content of the article

In response to Reuters questions about the letter and investigation, Binance Chief Communications Officer Patrick Hillmann said, “Regulators around the world are reaching out to all major cryptocurrency exchanges to better understand our industry. This is a standard process for any regulated organization and we regularly work with agencies to answer any questions they may have. ” Binance has “an industry-leading global security and compliance team” of more than 500 employees, including former regulators and law enforcement officers, Hillmann added.

He did not say how Binance responded to the Justice Department’s request. A Department spokesman declined to comment.

The request reveals the broad scope of the US investigation into Binance. The existence of the probe was reported last year by Bloomberg but so far little was known about it. A Binance spokesperson told Bloomberg at the time, “We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative way.”

Advertising 4

Content of the article

The letter filed 29 separate requests for documents produced since 2017, covering the company’s management, structure, finances, anti-money laundering and sanctions compliance and business in the United States. “Binance is required to produce all documents and materials that respond to this letter in its possession, custody or control,” he said.

Binance was launched by Zhao, known as CZ, in Shanghai in 2017 and by July controlled more than half of the world’s cryptocurrency markets, processing transactions worth over $ 2 trillion that month. Born in China and educated in Canada, where he holds citizenship, Zhao told Bloomberg in March that he will work for the “foreseeable future” in Dubai, which that month granted Binance a license to conduct some operations.

Advertising 5

Content of the article

A series of Reuters articles this year revealed how Binance drove its explosive growth by maintaining weak customer controls and withholding information from regulators. Reuters found that loopholes in Binance’s compliance program allowed criminals to launder at least $ 2.35 billion in illicit funds through the exchange, which also served traders in Iran despite US sanctions. Until mid-2021, Binance clients could trade cryptocurrencies by registering with a single email address.

Binance disputed the Reuters results, calling them “obsolete”. The exchange said it is “driving higher industry standards” and seeking to “further improve our ability to detect illegal crypto activity on our platform.” He said he did not consider Reuters’ calculations of illicit funds flows to be accurate.

Advertising 6

Content of the article

USA ballot

Cryptocurrency exchanges are under increasing scrutiny in the United States, where top government officials, including Treasury Secretary Janet Yellen, have publicly advocated for more industry regulation this year. In February, the Justice Department established a national cryptocurrency enforcement team to “tackle the growth in crime involving these technologies,” with a focus on exchanges.

That month, the founders of another exchange, BitMEX, pleaded guilty to violating the Bank Secrecy Act and were subsequently sentenced to two and a half years of probation. BitMEX has agreed to pay a $ 100 million fine to settle separate charges for violating the law. BitMEX now claims it is “fully committed to running its business in compliance with all applicable laws” and has made “substantial investments” in its compliance program.

Advertising 7

Content of the article

The 2020 Department of Justice letter was addressed to Binance Holdings Ltd., a Cayman Islands corporation, and to Roberto Gonzalez, a Washington-based attorney at Paul Weiss law firm. Binance Holdings owns the Binance brand and, according to regulatory documents, is owned by Zhao. Gonzalez and Paul, Weiss did not respond to requests for comment.

Binance has an opaque corporate structure. He declined to provide details of the ownership or location of his main Binance.com exchange, which has not accepted customers in the US since mid-2019. Customers are instead directed to a separate US-based exchange called Binance.US, also controlled by Zhao, as the regulatory documents show. Binance.US registered with the Treasury in 2019; the main exchange never did.

Advertising 8

Content of the article

Since last year, over a dozen financial regulators around the world have issued warnings about Binance, saying it needed unlicensed users or violated anti-money laundering rules. In July, the Dutch central bank said it fined Binance more than € 3 million for operating in violation of its financial crime laws. A Binance spokesperson said at the time that the fine marked a “pivot in our continued partnership” with the central bank.

In the 2020 request, the Justice Department searched for all documents identifying Binance employees responsible for complying with the Bank Secrecy Act, details of its policies to combat illegal finance, and any reports of suspicious financial activity it had filed with authorities. . Binance was asked to provide information on any transactions between the exchange and users involved in ransomware, terrorism, and darknet markets, along with those targeted by US sanctions.

Advertising 9

Content of the article

The department also requested documents related to the “business reasons” for the creation of Binance.US. He asked for communications involving the 13 executives and partners – including Zhao, his co-founder Yi He and his chief compliance officer, Samuel Lim – on the topic of “the creation of Binance.US and its relationship with Binance”. Lim and Lui are still on Binance.

Reuters reported in January that Lim and other senior employees were aware that Binance’s anti-money laundering controls were not stringent, according to corporate messages reviewed by the news agency. Neither Lim nor Binance commented on the messages.

In addition to the Justice Department’s request, the Securities and Exchange Commission issued a subpoena to Binance.US operator BAM Trading Services that same month. The citation, reviewed by Reuters, required BAM to hand over documents showing whether any employees also worked for Binance’s core exchange and what services it was providing to the US company.

Binance.US did not respond to Reuters questions. The SEC said it did not comment on possible investigations.

    Advertising 1


Postmedia is committed to maintaining a lively yet civilized discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to moderate before they appear on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications – you will now receive an email if you receive a reply to your comment, there is an update in a comment thread you follow, or if a user is following comments. Visit our Community Guidelines for more information and details on how to change your email settings.

Leave a Comment