- Today, the US Department of Justice, with a series of allegations that will already shake the complex crypto world, has accused the company and CEO Changpeng Zhao.
- One of the accused crimes is allowing funds from the now-closed criminal dark web marketplace Hydra, which was involved in money laundering operations, to be directed to Binance accounts.
- These charges and the agreement came after FTX’s former CEO Sam Bankman-Fried faced fraud charges.
US Department of Justice is holding a press conference about Binance exchange: What are the charges? All details about the Binance investigation!
Department of Justice Accuses Binance Exchange
For years, the world’s largest crypto exchange, Binance, has faced rumors of irregularities and federal investigations. Today, the US Department of Justice, with a series of allegations that will already shake the complex crypto world, has accused the company and CEO Changpeng Zhao of allowing the laundering of large amounts of dirty money globally, from Cuba to Iran, Russia, and beyond, and engaging in real crimes and violating sanctions, among others.
The indictment against Binance announced before the press conference of the US Department of Justice led by Merrick Garland accuses the company of violating US anti-money laundering laws, including billions of dollars in transactions that violate US laws, including over a billion dollars involved in actual criminal activity and violating sanctions. Another indictment also accuses Zhao separately, especially for allowing these illegal transactions.
Garland announced during the press conference that Zhao is charged with conviction for a crime that resulted in disaster and that the company has agreed to pay a fine of $4.3 billion as part of an agreement with the DOJ, and Zhao is stepping down from the role of managing the company. Garland said at the press conference, “Binance prioritized profit over the security of the American people. Binance became the world’s largest crypto exchange due to the crimes it committed. Now it is paying one of the largest corporate fines in US history.”
Charges depict a company that, according to prosecutors, knowingly and deliberately turned a blind eye to the trade of funds from sanctioned countries and regions, such as Iran, Cuba, Syria, and the areas of Ukraine under Russian occupation. It is also accused of allowing funds from the now-closed criminal dark web marketplace Hydra, which was involved in money laundering operations.
US prosecutors claim that Binance processed both deposit and withdrawal transactions totaling $275 million for a cryptocurrency “mixing” service designed to make it more difficult to trace when the Dutch police shut down this service as part of a money laundering investigation in May 2019. The indictment alleges that Binance users included ransomware gangs, hackers stealing crypto from other exchanges, and fraudsters.
Money laundering charges against Binance
According to the charges, despite having served US customers, Binance violated US anti-money laundering laws for years after its founding in 2017, with almost no Know Your Customer (KYC) requirements. Zhao is accused in the charges of encouraging the company to operate in a “gray area” and allegedly told employees that it was “better to ask for forgiveness than permission.”
Despite appearing to implement stricter customer identification rules for users in 2021, according to the indictment, the company often ignored sanctions violations or deliberately allowed users to bypass anti-money laundering controls. According to the indictment, more than 12,500 users are claimed to have listed Iranian phone numbers on their accounts, but were allowed to continue trading.
At one point, an indictment alleges that a Binance employee was instructed in internal communication to check a user’s “VIP level” before banning accounts for violations or even allowing VIP users to create new accounts knowingly to bypass violations. In one internal communication, a Binance employee is alleged to have said the following to another: “Tell him to be careful about the flow of funds from darknet markets like Hydra, this account needs to go, it’s tainted.”
Rumors and reports of Binance being used by criminals have circulated for years. Reuters claimed in June 2022 that Binance facilitated over $2.35 billion in money laundering by hackers and drug traffickers, which Binance denied. In December of last year, Reuters wrote that the Department of Justice was considering filing penalty cases against the company.
These charges and the agreement came after FTX’s former CEO Sam Bankman-Fried faced fraud charges, who was once competing with Binance, one of the world’s largest crypto exchanges. Garland said in Tuesday’s press conference: “Just last month, the Department of Justice successfully prosecuted the CEOs of the world’s two largest crypto exchanges in two separate criminal cases. The message here should be clear: Using new technology to violate the law does not make you disruptive; it makes you a criminal.”
