- Recently troubled crypto exchange Binance is set to be under the supervision of a company appointed by the US Department of Justice (DoJ).
- The company, Forensic Risk Alliance (FRA), will monitor Binance’s compliance with regulations over the next three years.
- This development comes in the wake of Binance’s former CEO, Changpeng “CZ” Zhao, being sentenced to prison for failing to implement an effective Anti-Money Laundering (AML) program.
Binance, under scrutiny, will be monitored for regulatory compliance by Forensic Risk Alliance for the next three years, following the sentencing of its former CEO.
Binance Under Intense Scrutiny
Binance, a major cryptocurrency exchange, is facing intense scrutiny from US authorities. Following its admission of guilt in November 2023 to money laundering charges and a hefty fine of $4.3 billion, the DoJ has appointed international consultancy firm FRA to monitor Binance’s regulatory compliance over the next three years. This appointment stems from a crucial requirement of Binance’s defense agreement. FRA will have comprehensive access to Binance’s internal records, physical facilities, and even employee interactions. They will also provide regular updates to the Justice Department about the company’s activities. This unprecedented level of oversight aims to ensure Binance’s compliance with all relevant regulations and prevent future violations.
Previous Consultancy Firm Worked with FTX
The initial pioneers for the monitoring role were law firm Sullivan and Cromwell. However, their previous work for the now-bankrupt crypto exchange FTX raised red flags. FTX creditors claim that Sullivan and Cromwell actively participated in FTX’s “multi-billion dollar fraud,” thereby increasing concerns about potential conflicts of interest with Binance. This ultimately led to the Justice Department’s choice of FRA for the closer three-year monitoring period. Interestingly, reports suggest that Sullivan and Cromwell may still have a role in Binance’s future, with expectations of their selection for a separate five-year monitoring task under the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This reflects the complex regulatory landscape surrounding cryptocurrency exchanges.
Prison Sentence for Changpeng Zhao
The news of FRA’s appointment comes just weeks after Binance’s former CEO, Changpeng “CZ” Zhao, was sentenced to prison. As we reported, Judge Jones sentenced Zhao to four months behind bars for failing to implement an effective AML program at Binance. While prosecutors sought a harsher three-year prison sentence, the judge acknowledged the lack of evidence showing Zhao’s direct knowledge of certain illegal activities. The confluence of these events paints a picture of Binance under intense pressure. The lengthy monitoring period combined with Zhao’s imprisonment signals a strong message from US authorities. If Binance wants to regain the trust of regulators and investors, it will need to demonstrate a genuine commitment to regulatory compliance. The next three years will be critical for Binance. Its ability to succeed during this intense monitoring period will determine its future trajectory in the ever-evolving cryptocurrency environment.
Conclusion
With the appointment of FRA to monitor its regulatory compliance, Binance is entering a critical phase. The outcome of this three-year period will significantly impact the exchange’s future. Amidst regulatory pressures and the imprisonment of its former CEO, Binance’s commitment to compliance will be under the spotlight. The exchange’s ability to navigate this challenging period will be crucial in determining its standing in the complex and evolving world of cryptocurrency.
