US authorities have become interested in the relationship of American hedge funds with Binance as part of an investigation into a possible violation of anti-money laundering rules. It is reported by The Washington Post.
The US Attorney’s Office for the Western District of Washington in Seattle has sent subpoenas to investment firms over the past few months, sources said. Law enforcement officers asked them for reports on transactions with Binance.
The subpoenas do not necessarily mean that the authorities will bring charges against the exchange or its founder and CEO Changpeng Zhao, experts explained to The Washington Post. According to Reuters, the US Department of Justice is weighing such a possibility, but also allows for a pre-trial settlement of the issue with the company.
Binance Chief Strategy Officer Patrick Hillmann noted that the company “communicates with every regulator around the world on a virtually daily basis.” He declined to comment on the status of any investigations in the US regarding the exchange.
As the largest crypto trading platform, Binance has attracted the attention of law enforcement and regulatory authorities due to the lack of KYC regulations for many years.
According to Reuters, from 2017 to 2021, attackers laundered at least $2.35 billion in ill-gotten funds through the exchange. Among them were assets associated with the Hydra darknet marketplace and the North Korean hacker group Lazarus.
Hillmann acknowledged that the company had weaknesses in compliance in its early years of growth. But he noted that in the future, Binance funded compliance programs and cooperated with law enforcement officers.
Based on his experience, Goz suggested that prosecutors were investigating Binance’s potential violation of the bank secrecy law. The act requires financial institutions to identify a customer and report suspicious activity that could be a sign of money laundering, tax evasion and other offences.
According to Goz, the mentioned subpoenas mean that the authorities are interested in Binance’s relationship with American investors. The global platform of the exchange classifies the United States as a region where users from which are not allowed to trade. The company opened a branch in the country with a limited product offering. For example, the site lacks a number of speculative derivatives that are illegal in the United States.
Many Americans claim to have bypassed Binance restrictions, The Washington Post noted. There are tons of tips on social media on how to do this. Blogger Full Value Dan posted a video on YouTube titled “How I did Binance KYC.”
The instructions include opening a business in Taiwan and using the documents of a resident of this jurisdiction. According to him, he successfully used this path, being an American citizen.
According to Hillmann, the company has tested both this and other loopholes and found that they do not work.
On a corporate level, one of the $2.5 billion investment firms surveyed admitted to trading on the exchange’s global platform through a structure registered outside the United States. Most of the companies stated that they use Binance.US or prefer Coinbase.
Binance’s user base reached 120 million in 2022. The team has grown to 7,500 employees, of which 10% are in compliance, according to Changpeng Zhao.