Cryptocurrency exchange Binance received a formal request from the US Department of Justice in 2020. What is it about?
Back in December 2020, the US Department of Justice sent a formal request to Binance to voluntarily disclose internal correspondence between Changpen Zhao, the platform’s founder, and twelve other senior executives. This was for illegal transactions related to possible money laundering. The information about this appeared in a Reuters publication the day before, with Zhao himself having already commented on it on Twitter. According to him, the above-mentioned procedure is standard practice and no cause for panic because Binance is fully committed to complying with the requirements of regulators. We tell you more about what is happening.
As a reminder, Binance has been attracting increased interest from regulators in many parts of the world for quite some time. Their main complaint is the decentralized structure of the company. It has been years since the exchange did not even have its own headquarters, though Zhao promised to disclose more information about it last month.
Well, the topic of possible financial fraud within the cryptocurrency community has already come up this week. In particular, the former head of MicroStrategy came under scrutiny by the D.C. Attorney General’s Office the day before. According to D.C. Attorney Carl Racine, Saylor may have used his own company to evade taxes.
MicroStrategy CEO Michael Saylor
The particularity of the case lies in where Seylor lives. He says his personal and work life is centred in Florida, where there is no income tax. However, officials insist that Michael spends most of his time in Washington during the year, even though he did not pay taxes to the state. The amount outstanding, along with any fines, could total more than $100 million.
What is going on with the Binance exchange
According to The Block’s sources, the anti-money laundering division of the US Department of Justice sent a request to the exchange for voluntary reporting related to detection of illegal transactions and engagement of US customers. The request applied to any correspondence instructing employees of the platform to “destroy, alter or remove documents from Binance’s files” or “transfer them from the United States”. The request involved Zhao as well as 12 other members of management and associates.
Binance CEO Changpen Zhao
The request was made in December 2020 in connection with an agency investigation into the exchange’s compliance with US financial crime laws. In addition, US authorities are investigating whether Binance may have violated the Bank Secrecy Act.
Recall that under this law, a major US business represented by cryptocurrency exchanges must register with the US Treasury Department and comply with anti-money laundering requirements.
The relationship between Binance and Binance.US, the US subsidiary of the cryptocurrency exchange, was of particular interest to the US Department of Justice. It was launched back in 2019, and can also be found on the US Department of Justice’s registry. However, the aforementioned parent company’s focus specifically on decentralisation has raised questions for Americans.
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The US Securities and Exchange Commission (SEC) has also shown interest in Binance.US. Not long ago, the regulator even issued a subpoena to the operator of the exchange’s US arm, BAM Trading Services. The proceedings concerned the services provided by the platform as well as the terms of employment contracts of employees with US citizenship.
Binance tops the list of cryptocurrency exchanges
News of the DOJ and SEC enquiries have not yet received an official response from Binance, but they have already been commented by Binance’s Director of Communications, Patrick Hillmann.
Regulators around the world are reaching out to every major cryptocurrency exchange to better understand our industry. This is a standard process for any regulated organisation, and we regularly work with various agencies to answer any questions they may have.
Binance communications director Patrick Hillmann
Binance chief executive Changpen Zhao also posted a response on Twitter. He was quick to assure his followers that there is no reason to panic.
Today, another story about how the cryptocurrency company received a request from the regulator. It asks them to voluntarily share certain information back in 2020, which we did. It is important for the industry to build trust with regulators. My chat posts are half public anyway.
In his tweet, Zhao emphasised the word “voluntarily” in the quote about the US Department of Justice request
All in all, it would be strange if Binance didn’t communicate regularly with some of the world’s government agencies. For the average user, little has changed from this news, but there is confidence that Binance will not fall victim to heavy pressure from some governments solely because of some suspicions. However, even that kind of interaction between the exchange and the authorities is sure to have critics who generally do not want their assets to be touched in any way by officials and other such categories of people.
This request was sent to the exchange at the end of 2020, which means it clearly didn't end badly. In any case, it is funny that journalists are sharing such details now - when the coin industry is in the midst of a bearish trend and any negative news is able to make rates fly even lower.
In general, the platform's cooperation with regulators is commonplace. Without it, the industry would be unlikely to reach the level of development it is at today. At least in certain regions.
What do you think about this? Share your opinion in our millionaires’ cryptochat. There we discuss other important developments related to the blockchain and decentralisation industry.
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