The US Justice Department is investigating allegations that Binance, the world’s largest cryptocurrency exchange, was used by unnamed persons to evade sanctions placed on Russia following the invasion of Ukraine in February 2022, according to recent reporting by Bloomberg.
Bloomberg, citing five anonymous sources, said Binance is the focus of investigations by both the national security and criminal divisions of the Justice Department. Binance is reportedly negotiating with the Justice Department to settle allegations last year that its exchange was used to evade sanctions on Iran for its nuclear weapons program.
Binance attributes its mounting, international legal problems to sloppy internal controls that it has been restructuring since 2021, according to a statement released by the company.
“In 2021, Binance launched an initiative to completely overhaul its corporate governance structure, including bringing in a world-class bench of seasoned executives to fundamentally change how Binance operates globally,” the statement said. “Our policy imposes a zero-tolerance approach to double registrations, anonymous identities, and obscure sources of money.”
Binance limited services to Russia after sanctions were imposed on the country in April 2022 but reportedly continued operating there, blocking only areas of Ukraine that were no longer under government control and servicing only non-sanctioned individuals.
Binance is the focus of many investigation
The investigation into alleged violations of Russia sanctions is just the latest of many investigations of Binance by several financial regulators in the US and other nations. Here is at least a partial list:
Iran: It was reported last November that the Justice Department is investigating $8 billion worth of business that Binance did with Iranian users of the platform to see if those transactions violated US sanctions on the Islamic state.
Israel: Reuters News Service reported last week that the Israeli National Bureau for Counter Terror Financing (NBCTF) had confiscated two Binance accounts and their contents. Reuters cited a document on the NBCTF website saying the seizure was to “thwart the activity” of Islamic State and “impair its ability to further its goals.”
Brazil: The Brazilian Securities Exchange Commission reportedly turned over evidence to prosecutors that Binance has provided users in Brazil with instructions for evading a stop order on cryptocurrency investments, which were banned there in 2020, according to a report in CoinTelegraph. The crypto industry publication cited reporting in the Brazilian newspaper Valor Econômico.
Commodity Futures Trading Commission: The US CFTC filed a civil enforcement action in March charging Changpeng Zhao, founder and CEO of Binance, and three entities “with numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations.”
“Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to ‘block’ or ‘restrict’ customers located in the United States from accessing its platform,” the Commission stated.
Also named in the complaint was Samuel Lim, allegedly for aiding and abetting Binance’s violations during his tenure as chief compliance officer.
A joint IRS/Justice Department investigation: Investigators from both the Internal Revenue Service and the US Justice Department were reported last year to be investigating whether Binance was used by U.S. residents using cryptocurrencies for illegal transactions.
Binance is talking settlement
Binance is under scrutiny by three offices of the Department of Justice: the Money Laundering and Asset Recovery Section (MLARS), the U.S. Attorney’s Office for the Western District of Washington, and the National Cryptocurrency Enforcement Team. The company is negotiating to settle the investigations by paying fines, according to a February report in the The Wall Street Journal. Other reports have said the various divisions of the Justice Department are divided over whether to settle the cases with stiff fines or to pursue criminal complaints, which would raise the possibility of jail sentences, against various Binance executives, including CEO and founder Changpeng “CZ” Zhao.
