Money laundering, counter-sanctions The US Department of Justice reveals 8 details of Binance’s illegal activities

US Department of Justice Exposes 8 Details of Binance's Illegal Activities Involving Money Laundering and Counter-Sanctions

Source: Hive Tech

On November 21st, the US Department of Justice announced that the world’s largest cryptocurrency exchange, Binance, and its founder and CEO, Changpeng Zhao, have admitted to criminal charges, including violating anti-money laundering laws, unauthorized fund transfers, and sanctions violations in the largest-ever corporate resolution. The charges involve the Bank Secrecy Act and the International Emergency Economic Powers Act.

The Department of Justice has demanded Binance to pay a fine and forfeiture amount of $4.3 billion, which is one of the harshest penalties imposed on a corporate defendant in a criminal case by the Department of Justice.

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In addition to the fines, the Department of Justice also requires Binance to implement supervision and reporting, including the obligation to provide suspicious activity reports in accordance with the law, and to continue reviewing suspicious activities in past transactions. This measure aims to advance criminal investigations into malicious online activities and terrorist financing activities, including the use of cryptocurrency exchanges to support organizations such as Hamas.

The Department of Justice stated that it will ensure Binance and Changpeng Zhao are held accountable. Subsequently, Changpeng Zhao announced his resignation as CEO on X and said, “I made a mistake and must take responsibility.”

In the public speaking draft by Attorney General Merrick B. Garland, specific details of Binance and Changpeng Zhao’s violations were disclosed, referring to them as “willful violations” and “pretending to comply.”

The US Department of Justice alleges that Binance and its CEO Changpeng Zhao have admitted to illegal conduct‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍

1. In August 2017, Changpeng Zhao founded Binance. From the very beginning, Zhao and other Binance executives attracted and developed a large customer base in the United States without implementing the controls required by US law. Nearly 2 years after Binance’s establishment, Zhao informed senior management that the US market accounted for 20% to 30% of the company’s potential revenue

2. Binance provided services to US customers but failed to comply with US laws, including failing to register with the US Department of the Treasury as a money services business and failing to implement an effective anti-money laundering program, instead facilitating billions of dollars in unregulated cryptocurrency transactions, including unregulated transactions totaling billions of dollars between US users and users subject to US sanctions.‍

3. Binance facilitated nearly $900 million in transactions between US and Iranian users and also facilitated millions of dollars in transactions between US users and users in Syrian and Ukrainian regions occupied by Crimea, Donetsk, and Luhansk.

4. Some Binance employees were aware that the company provided services to users in sanctioned countries. In a chat in February 2019, an employee in compliance wrote, “Do you find it too difficult to launder drug money nowadays? Come to Binance, We got cake for you.”

5. Between August 2017 and April 2022, the Russian dark web marketplace Hydra directly transferred approximately $106 million in Bitcoin to Binance.com wallets. It was only in April 2022 that the Department of Justice and German law enforcement partners seized control of Hydra and shut it down, after which Binance ceased processing transactions from Hydra.‍

6. Between February 2018 and May 2019, Binance processed deposits totaling over $275 million and withdrawals totaling $273 million for the cryptocurrency anonymization service provider Bestmixer. Bestmixer was once one of the largest cryptocurrency anonymous service providers but was shut down due to money laundering concerns.‍

7. In June 2019, Binance established a separate US exchange, Binance.US, and registered with the Department of the Treasury to serve the US market, publicly announcing the prevention of US users from accessing Binance.com. However, in reality, Binance retained some of the most important high-volume US users, allowing them to remain on the unregulated Binance.com exchange. Under the guidance of Changpeng Zhao and other Binance executives, employees encouraged high-volume US users to conceal their connection to the US, create new accounts to hide their location.‍

8. Over a year after Binance publicly announced the prevention of US users, an internal monthly report showed that 16% of the total registered users on Binance were from the US, making it the largest country on the Binance.com platform. In the next monthly report, Binance removed the US label and classified US users as “UNKWN,” which stands for “unknown.” In October 2020, users marked as “UNKWN” accounted for approximately 17% of the Binance registered user base.

From the speech by Merrick B. Garland, the Attorney General of the United States, it can be understood that multiple regulatory agencies of the Department of Justice and the Treasury Department participated in the investigation against Binance and Changpeng Zhao. These include the Criminal Division’s Money Laundering and Asset Recovery Section, the National Security Division’s Counterintelligence and Export Control Section, as well as the United States Attorney’s Office for the Western District of Washington. The investigation also involved Treasury Secretary Yellen, the Criminal Investigation Division of the Internal Revenue Service, and the Commodity Futures Trading Commission.

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