Binance Faces US Probe of Possible Russian Sanctions Violations - BLOOMBERG
(Bloomberg) -- The Justice Department is investigating whether Binance Holdings Ltd. was used illegally to let Russians skirt US sanctions and move money through the world’s biggest cryptocurrency exchange, according to people familiar with the matter.
The inquiry by the Justice Department’s national security division is looking at whether Binance or company officials ran afoul of sanctions related to Russia’s invasion of Ukraine, according to five people familiar with the matter who asked not to be named discussing a confidential investigation.
The probe, which hasn’t previously been reported, is moving on a parallel track with an existing inquiry by the criminal division, one of the people said. The development adds a new layer of scrutiny to the operator of the world’s biggest crypto exchange as the sector reels from a series of stunning bankruptcies and high-profile scandals.
Binance has been in discussions with the Justice Department to resolve previous complaints that the exchange was used to evade sanctions against Iran prior to strong compliance controls being put into place, according to another person familiar with the matter.
Binance said in a statement that the company complies fully with all US and international financial sanctions.
“In 2021, Binance launched an initiative to completely overhaul its corporate governance structure, including bringing in a world-class bench of seasoned executives to fundamentally change how Binance operates globally,” the statement said.
The company’s “know your customer” protocols rival any in the traditional banking system and every customer is required to go through the controls, which include country of residence and personal identification checks, Binance said.
“Our policy imposes a zero-tolerance approach to double registrations, anonymous identities, and obscure sources of money,” Binance added.
The Justice Department declined to comment.
Binance is already wrestling with multiple criminal and regulatory investigations. One of the most significant actions by the US to crack down on the cryptocurrency industry came in March when Washington’s derivatives regulator alleged that Binance broke its rules for years.
The Internal Revenue Service, as well as federal prosecutors, have been examining Binance’s compliance with anti-money laundering obligations, Bloomberg News has reported. The Securities and Exchange Commission has been scrutinizing whether the exchange has supported the trading of unregistered securities.
Binance has said it takes its legal obligations seriously and collaborates with regulators and law enforcement.
Binance’s co-founder, Changpeng Zhao, disputed many of the issues alleged in the civil lawsuit filed in March by the Commodity Futures Trading Commission.
Zhao said in a blog post at the time that the CFTC lawsuit “appears to contain an incomplete recitation of facts.”
Binance has hired law firms including Gibson Dunn & Crutcher and Latham & Watkins in the high-stakes showdown with the CFTC.
Not all inquiries lead to formal allegations of wrongdoing and these complex investigations can take time. There is no indication at the moment that the Justice Department is preparing to agree to a settlement with Binance, such as a non-prosecution or deferred-prosecution agreement, one of the people said. A company might negotiate with the government over terms for an agreement, depending on the facts of the case.
Binance has closed gaps in its regulatory compliance, Chief Strategy Officer Patrick Hillmann said in an interview in February. He said the company is in settlement discussions with US regulators, but didn’t specify a timeline or potential settlement amounts.
Co-founded by Zhao in Shanghai in 2017, Binance has morphed into a brokerage, digital wallet, venture fund, custody service, data provider, digital-art marketplace and token issuer — all in one. While the company has no official headquarters, it has set up major hubs in Dubai and Paris.
Any action against Binance would reverberate across the crypto industry. After the collapse last year of Sam Bankman-Fried’s FTX empire, Binance solidified its dominance as the biggest crypto exchange and accounted for 53% of all spot trading in March, according to data from researcher CCData. In a popular product known as perpetual futures, Binance controlled a record 62% of global volumes in 2022, a CoinGecko report shows.
--With assistance from Yueqi Yang and Sabrina Willmer.