In recent months, the US Attorney’s office for the Western District of Washington issued subpoenas for hedge funds that interacted with Binance. the washington post reported citing sources familiar with the matter. The report noted that prosecutors had ordered investment firms to hand over their communication records with Binance.
The subpoenas are part of a larger, long-running investigation into one of the world’s leading cryptocurrency exchanges for possible violations of US anti-money laundering laws.
In December, Reuters reported Prosecutors discussing a possible deal with Binance. However, federal prosecutors are also evaluating whether they have enough evidence to bring charges against the exchange.
Binance CEO Changpeng Zhao (CZ) denied that the exchange was working with the Justice Department to resolve matters out of court, calling Reuters “wrong.”
Legal experts told the Post that lawmakers have long been exasperated with Binance. John Ghose, a former Justice Department prosecutor who specializes in crypto cases, told the Post that Binance’s lack of know-your-customer (KYC) requirements for years made it a conduit for criminals to launder money.
Founded in 2017, Binance implemented KYC requirements in August 2021 amid increasing regulatory scrutiny.
Based on his experience, Ghose said prosecutors are likely looking into whether Binance violated the Bank Secrecy Act, which requires companies to verify user identities. The law also requires businesses to file suspicious activity reports that could be potentially illegal.
Ghose added that the law would apply only if Binance provided services to US-based clients.
Binance chief strategy officer Patrick Hillmann had previously acknowledged that the exchange had a less-than-desirable approach to regulatory compliance in the first few years after its establishment. However, Hillmann said that Binance changed its stance recently and invested heavily in compliance programs, worked with law enforcement, and developed new technologies to capture illicit funds on its platform, the Post reported.
Binance grew up its compliance team counts from 500 to 750 in 2022 and has acquired 14 licenses worldwide. At the end of last month, Binance United the US Chamber of Digital Commerce to work with regulators and promote the development of sensible crypto and blockchain regulations.
Since FTX’s collapse in November 2022, regulators around the world have intensified scrutiny of the largely unregulated crypto industry. FTX founder Sam Bankman-Fried (SBF) pleaded ‘not guilty’ to multiple fraud charges earlier this week. His trial has been set for October 2023.
Binance was an early investor in FTX, and CZ decided to sell FTX’s native token FTT, which ultimately led to FTX’s bankruptcy and the exposure of alleged fraud by SBF. Amid the headwinds of the FTX crash, Binance’s daily trading volume has sunken significantly, hitting two-year lows last month.
