Senators Probe Crypto Exchange Binance After FTX Collapse

Changpeng Zhao, CEO of Binance, speaks at the Delta Summit, Malta’s official blockchain and digital innovation event promoting cryptocurrency, in St Julian’s, Malta on October 4, 2018.

Darrin Zammit Lupi | Reuters

WASHINGTON — A bipartisan group of senators has asked Binance, the world’s largest cryptocurrency exchange and once competitor to bankrupt crypto giant FTX, for detailed information about its business operations amid accusations of illegal practices.

The senses. Elizabeth Warren, D-Mass., Chris Van Hollen, D-Md., and Roger Marshall, R-Kan., requested a slew of documents about the company’s finances, compliance, and risk management practices from Binance and its US subsidiary, Binance .US, in a letter dated Wednesday.

“In the years since Binance’s founding, the company has faced increasingly disturbing allegations regarding the legality of its operations,” the senators wrote in a letter to Binance CEO Changpeng Zhao and CEO from Binance.US Brian Shroder.

The Justice Department opened a criminal investigation into Binance and Zhao in 2018 – the year after the company launched – amid concerns that the exchange defied US anti-money laundering and sanctions laws. The agency has not decided to press charges against the company or against individual executives.

A Binance spokesperson told CNBC that the company is looking forward to “correcting the record” regarding its operations. The person added that the exchange responds to questions from officials in the jurisdictions it operates to “both explain our business operations and cooperate with regulators.”

“ does not operate in the United States, nor do we have any US-based customers, however, we appreciate the Senators’ request and will provide information to help them better understand why we are staying. the most trusted platform with users around the world,” the spokesperson added.

A Binance.US spokesperson said separately, “We welcome engagement with policymakers and look forward to responding to inquiries from senators.” The person added that the company is “confident in the strength of our operations,” including its compliance practices and its policy of not trading or lending funds to customers.

Binance has become the undisputed leader in the digital exchange industry since FTX filed for bankruptcy and its founder, Sam Bankman-Fried, stepped down in November. Bankman-Fried was later arrested and charged with defrauding investors, making illegal political contributions and committing commodity fraud, among other charges. Bankman-Fried has pleaded not guilty in that case.

In their letter, the senators outlined the Department of Justice’s allegations against Binance and claimed that the company demonstrated a lack of transparency.

They also accused Zhao of refusing to disclose the location or entity of his exchange “in what many see as a blatant attempt to dodge global financial regulators, serve ‘unlicensed users,’ and violate the anti-money laundering laws”.

The Securities and Exchange Commission also alleged that Zhao was using Binance.US as a front company to distract US regulators from illegal activities, including that it allegedly processed at least $10 billion in payments to criminals and US sanctions evaders, the senators said in the letter.

“Mr. Zhao’s assertion that Binance.US is completely independent is eerily similar to Sam Bankman-Fried’s assertions regarding the distinction between FTX US and FTX. – allegations that appear to be false, given that FTX US has filed for bankruptcy, its users have lost access to their funds, and its new CEO has declared that it is in fact insolvent,” the letter reads.

The senators requested a list of seven items, including full copies of company balance sheets dating back to 2017, copies of internal anti-money laundering policies, and any written policies on the relationship between Binance and Binance.US by March 16.

The collapse of FTX, which affected more than one million investors, highlighted “the need for real transparency and accountability in the crypto industry,” the senators wrote.

“Binance is the world’s largest cryptocurrency exchange by volume, with over 120 million users worldwide, which means it is uniquely positioned to facilitate illicit financial transactions on an unparalleled scale, putting jeopardize the savings of millions of daily users,” they wrote.

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