Crypto May 15, 2021

The World’s Largest Crypto Exchange Binance Under Investigation


Binance, which is ranked the world’s biggest crypto exchange, is reportedly under investigation by U.S. authorities. The crypto exchange is being probed by the Department of Justice (DOJ) and the Internal Revenue Service (IRS) for possible financial crimes.

Since inception, Binance Holdings Ltd. has operated a financial behemoth spanning across different parts of the world, including derivative entities for crypto trading that have been barred from working in the U.S.

The crypto exchange has effectively managed to project its status above the level of its peers through a host of policies and regulatory hires, including former U.S. lawmaker Max Baucus. Brian Brooks, a former expert in U.S. banking regulation was appointed CEO of the organization’s U.S. affiliate last month.

While commenting on the latest predicament, the Binance spokesperson asserted her organization’s adherence to legal requirements concerning the engagement of regulators and respective law enforcement agencies.

The spokesperson went on to emphasize that they have endeavored to construct a robust regulatory compliance program that comprises the requisite anti-money laundering policies – including the various tools and protocols that are needed by financial establishments to investigate and address potential criminal activities.

While specific charges have not been spelled out under the current probe, the fact that money laundering and tax enforcement officials have been involved in the investigation points to possible suspicions of tax fraud and crypto crime.

Binance Dismisses the Reports

The Binance CEO Changpeng Zhao (also known as CZ) was quick to dispel the current media reports of any wrongdoing. While referring to an article by Bloomberg, CZ published a tweet that condemned the objectivity of the media report in writing a “misleading title.” The executive went on to echo the organization’s claims that they have been collaborating with law enforcement agencies to target bad actors.

The lasts media event sent a few ripples across the crypto industry. Even though CZ dismissed the lasts reports, Binance Coin took a hit from the headlines as its price dropped by more than 12 percent, reaching a $522 low thereafter.

In addition, observers noted that both Bitcoin and Ethereum suffered from the negative publicity as crypto holders rushed to sell their coins in a frenzy.

Looking back, another Bloomberg article had reported that the Commodity Futures Trading Commission (CFTC) was probing Binance in March over possible irregularities. The media outlet alleged that the authorities were evaluating whether Binance U.S. users had traded in crypto derivatives on the company’s non-U.S. platform.

In response, Binance claimed that it always prevented American residents from getting investment products that would demand registration with the CFTC if handled in the U.S. The crypto exchange further stated that it has a strict adherence to all the existing legal and regulatory obligations as prescribed by the individual countries of operation.

What Do the Researchers Say?

According to a 2019 report by Chainalysis, a leading blockchain analytics firm, crypto exchanges have always been a popular conduit for criminals looking to launder illegally-acquired cryptocurrency.

The report indicated a growing increase in crypto exchange usage from the beginning of the year 2019. The firm intimated that an analysis of the annual trends showed that $2.8 billion worth of Bitcoin was transferred from criminal sources into crypto exchange – more than half of this figure accounted for total remittances made to Binance and Huobi exchanges.

Point to note, Binance and Huobi happen to be the world’s two biggest exchanges. The fact that the two entities may turn out to be a favorite among crypto criminals is surprising considering the obvious assumption that the two firms operate under constant law enforcement scrutiny.

The above reality challenges the expectation that both organizations adhere to tough KYC/AML protocols.


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