Key TakeawaysU.S. prosecutors requested documents from Changpeng “CZ” Zhao and other Binance executives related to the exchange’s anti-money laundering checks and communications handling compliance issues. Zhao confirmed claims made in a Reuters report on the matter, saying his team had “voluntarily” handed over files when requested. Binance has refuted several allegations Reuters has made about the firm’s business practices over recent months.
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The Justice Department reportedly asked for company records that were labeled as “documents [to] be destroyed, altered, or removed from Binance’s files” or “transferred from the United States.”
DOJ Sought Files From CZ
U.S. prosecutors asked Binance to provide documents detailing its anti-money laundering checks, as well as messages involving the firm’s CEO Changpeng “CZ” Zhao.
The Justice Department asked CZ and 12 other exchanges and partners to disclose messages that discussed how the exchange handles illegal transactions and recruits U.S. customers, Reuters reported Thursday citing a December 2020 request. It also asked the company to share records on files that were labeled as “documents [to] be destroyed, altered, or removed from Binance’s files” or “transferred from the United States.” According to the report, the prosecutors requested 29 documents on the company’s management, structure, finances, business, and compliance practices dating back to 2017.
The request came as part of a probe into Binance’s compliance with U.S. financial regulations. According to several sources familiar with the matter, U.S. authorities wanted to ascertain whether Binance had violated the Bank Secrecy Act. The law requires crypto exchanges to register with the Treasury Department and comply with anti-money laundering regulations. Violation of the act can carry a 10-year prison sentence.
Responding to Reuters’ request for comment, Binance chief communications officer Patrick Hillmann said that it was “a standard process” for regulators to reach out to regulated crypto organizations. “We work with agencies regularly to address any questions they may have.”
CZ also confirmed the claims made in the report on Twitter today, saying that the exchange had voluntarily handed over information. U.S. prosecutors put forward “a request to VOLUNTARILY share certain information back in 2020, which we did,” he wrote, adding that it was “important for the industry to build trust with regulators.”
Binance Refutes Reuters Allegations
Reuters has published a number of investigative pieces leveling damaging allegations at Binance over the past year, but the exchange has repeatedly refuted the claims. In July, a Reuters report alleged that Binance had evaded U.S. sanctions to serve Iranian customers, to which CZ responded that the firm uses Reuters’ own KYC product to verify customers. A month before that, Reuters claimed that criminals had used Binance to launder $2.35 billion in stolen funds. Crypto Briefing reached out to Binance on the matter at the time, and a representative said that the report used “outdated information and unverified personal attestations as a crutch to establish a false narrative.” Binance also published a blog post in April refuting claims from a Reuters report that it had handed over data to Russian authorities.
Binance is the world’s top cryptocurrency exchange, handling about $60 billion in daily volume, per Nomics data. Since launching in 2017, it’s seen explosive growth as demand for digital assets has grown. In 2021, it faced intense scrutiny from regulators worldwide over its practices, coming under fire for allegedly serving customers without registering in jurisdictions and failing to comply with anti-money laundering checks. Binance introduced several measures to comply with regulators in response, including slashing its leveraged trading offering from 100x down to a maximum of 20x and introducing tougher identification checks to register an account.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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