Justice Department and IRS are seeking information about Binance but haven’t accused Binance of wrongdoing

By Selena On May 14, 2021

Currently, Binance Holdings Ltd. is being investigated by the Department of Justice and the Internal Revenue Service to root out an illegal activity that is thriving in the hot but largely unregulated cryptocurrency market.

Bitcoin starts to plummet after reports of Binance investigation

Binance is a cryptocurrency exchange led by Changpeng Zhao, a talented tech executive. With his strategy, CZ has helped Binance surpass the competition since he co-founded it in 2017.

As part of the investigation, officials investigating money laundering and tax violations sought information from individuals with a deep understanding of Binance’s business. The company, like the industry in which it operates, has succeeded largely outside of government oversight. Binance was founded in the Cayman Islands and has an office in Singapore but they lack a single corporate headquarters. According to information from Blockchain research firm Chainalysis, among the exchanges they examined, more money related to criminal activity flows through Binance than any other crypto exchange.

Binance spokeswoman Jessica Jung said:

“We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion. We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.”

Spokespeople for the Department of Justice and the IRS declined to comment on Binance’s statement.

US officials have expressed concern that cryptocurrencies are being used to mask illegal transactions, including theft and drug dealing. Moreover, people are doing too well to bet on the wild rise of a tax-evading market. Such worries have been an obstacle for the industry in its quest to go mainstream, even as Wall Street increasingly accepts Bitcoin and other tokens amid a global investment frenzy.

While the Department of Justice and the IRS investigate potential criminal violations, we cannot determine the specifics of what the agencies are examining, and not all inquiries lead to criminal charges. wrong deviation. Several commenters said the IRS’s thorough scrutiny had been going on for months, with their inquiries signaling that they were looking into both the behavior of Binance customers and employees.

The U.S. Commodity Futures Trading Commission also investigated Binance for whether it allowed Americans to make illegal trades. In that case, the authorities checked to see if Binance would allow investors to purchase derivative products linked to digital tokens. U.S. residents are prohibited from purchasing such products unless the companies supplying them are registered with the CFTC.

Is there a story that the exchange supports money laundering and tax evasion transactions?

Zhao said:

“Binance closely follows U.S. rules, blocks Americans from its website, and uses advanced technology to analyze transactions for signs of money laundering and other illicit activity.”

Last year, the company warned that US residents would have their accounts frozen if they were found to be trading.

In terms of cryptocurrency-related criminal transactions, Chainalysi has been tracking $2.8 billion worth of Bitcoins that it suspects were transferred to trading platforms in 2019. Chainalysi determined that around 27% of them That transaction, or $756 million, involved Binance. Binance responded by saying it complies with all anti-money laundering regulations in the jurisdictions in which it operates and works with partners like Chainalysis to improve its systems.

In the United States, authorities have cracked down on exchanges to introduce laws to prevent financial crime, with officials citing the platforms used by hackers. Tax violations are also a priority, with the government recently winning a court order seeking to unmask US customers of Kraken, a San Francisco-based exchange.

In October, federal prosecutors in Manhattan announced charges against the founders of Seychelles-based BitMEX, accusing them of violating the Bank Secrecy Act by allowing thousands of Chinese customers to Periods trade while publicly claiming to restrict their access. Claims include failure to register as a futures merchant with the CFTC and insufficient anti-money laundering controls. Three of the BitMex officials pleaded not guilty and a trial has been scheduled for March 2022.

Binance has increased its presence in Washington and retained a former Treasury official and top defense attorneys to represent it in legal cases and matters being handled by regulators. consideration reason. In March, the company contacted former US Senator Max Baucus, a Montana Democrat, to advise them on policy and government relationships.

In September 2019, Binance partnered with a company called BAM Trading Services Inc., which launched Binance.US to cater to US customers. Brian Brooks, who served as a top banker when leading the Office of the Comptroller of the Currency during the Trump administration, became the chief executive officer of Binance.US this month.

In the midst of a hiring storm, the company has popped up in cases in the United States involving criminal activity. In February, two Florida men were accused of running an online fentanyl trading operation, with one of them accused of depositing the proceeds into a Binance account. That same month, the Department of Justice sought to seize $450,000 worth of cryptocurrency traced from ransomware attacks that hit several U.S. companies on a Binance account run by a 20-year-old national from the United States. Ukrainian president holds. The government has not accused Binance of misconduct in either enforcement action.

Along with the CFTC, the Justice Department will likely examine the steps Binance has taken to prevent US residents from leaving its exchange. A person familiar with Binance operations said that before the founding of Binance.US, Americans were advised to use virtual proxy networks or VPNs to disguise their location when trying to access the exchange.

Jung, a spokesperson for Binance, said the exchange has never encouraged US citizens to use VPNs to gain access because doing so would be against their company’s guidelines. In January, Zhao tweeted that Binance’s security system blocks Americans even if they try to connect through one of the networks.

Jung concluded:

“We have implemented strong access controls that have been tested via external audit and are under continuous review and evaluation by Binance to ensure that the appropriate restrictions are in place and are effective.”

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