Over the past few months, the US Attorney’s Office for the Western District of Washington issued subpoenas to hedge funds that interacted with Binance.Washington Post report Citing sources familiar with the matter. The report noted that prosecutors directed investment firms to turn over records of communications with Binance.
The subpoena is part of a long-running and extensive investigation into one of the world’s leading cryptocurrency exchanges for possible violations of US anti-money laundering laws.
December, Reuters report A prosecutor discussing a possible settlement with Binance. However, federal prosecutors will also evaluate whether there is sufficient evidence to bring charges against the exchange.
Binance CEO Changpeng Zhao (CZ) has denied that the exchange worked with the Justice Department to resolve the matter out of court, saying Reuters was “wrong.”
A legal expert told the Post that lawmakers have long resented Binance. Former Justice Department prosecutor John Gorse, who specializes in cryptocurrency cases, said Binance’s lack of know-your-customer (KYC) requirements over the years has created a conduit for criminals to launder money. He told the Post that it had become
Binance Founded in 2017 implemented KYC requirements in August 2021 amid increased regulatory scrutiny.
Based on his experience, Ghose said prosecutors are likely investigating whether Binance violated bank secrecy laws that require companies to verify the identity of their users. The law also requires companies to file suspicious activity reports that may be illegal.
Gorse added that the law only applies when Binance provides services to U.S.-based customers.
Binance Chief Strategy Officer Patrick Hillman has previously admitted that Binance had an unfavorable approach to regulatory compliance in its first few years of existence. But Hillman said Binance recently changed its stance, investing heavily in its compliance program, working with law enforcement agencies, and developing new technology to arrest illegal funds on its platform.
Binance has increased the size of its compliance team from 500 to 750 people in 2022 and has 14 licenses worldwide. Late last month, Binance joined the U.S. Chamber of Digital Commerce to work with regulators to promote the development of sensible crypto and blockchain regulations.
Since the collapse of FTX in November 2022, regulators around the world have stepped up their scrutiny of the largely unregulated cryptocurrency industry. FTX founder Sam Bankman-Fried (SBF) pleaded “not guilty” to multiple fraud charges earlier this week. His trial is set for October 2023.
Binance was an early investor in FTX and CZ decided to sell FTX’s native token, FTT, ultimately leading to FTX’s bankruptcy and exposure of alleged fraud by SBF. Amid the headwinds of the FTX collapse, daily trading volume on Binance plummeted, hitting a two-year low last month.