By Mark Ackman
According to a request, the federal prosecutors in the United States had reached out to Binance, the largest crypto exchange in the world, and asked it to provide extensive records about its anti-money laundering policies.
In addition, the Justice Department had also demanded that the exchange share communications pertaining to Binance’s founder and chief executive Changpeng Zhao, or CZ, as he is known.
The investigation
The money laundering division of the Justice Department had asked the crypto exchange to submit communications between the CEO and 12 other partners and executives voluntarily.
These messages were related to Binance’s recruitment of clients in the United States and its detection of illicit transactions.
They had also asked for any company records that boasted instructions for altering, destroying, or removing any documents from their files, or for them to be transferred from the US.
The request had been submitted back in December 2020 and had not been disclosed.
It was part of the investigation that the Justice Department had initiated into the compliance of the crypto exchange with the financial crime laws in the United States.
According to people familiar with the investigation, it is still ongoing.
The violations
These people disclosed that the authorities were trying to determine if the Bank Secrecy Act had been violated by the exchange.
This legislation requires crypto exchanges to be registered with the Treasury Department and they also need to follow the anti-money laundering policies if they have ‘substantial’ operations in the US.
The purpose of the said law is to prevent illicit financial activities from being conducted and its violation can result in jail time of about 10 years.
However, it was unclear as to how Binance, or its CEO Zhao, had responded to the said requests.
Binance’s response
Patrick Hillmann, the Chief Communications Officer at Binance, said that regulatory authorities all over the world are getting in touch with prominent crypto exchanges to understand how they operate.
He said that this is the standard operating procedure for all regulatory organizations and Binance also works with agencies for addressing their questions.
Hillmann also asserted that the crypto exchange has more than 500 people on its global compliance and security team, which includes former law enforcement agents and regulators.
But, he did not disclose how Binance had responded to the request of the Justice Department two years ago.
The request discloses just how heavily the exchange had been investigated by the US authorities. The existence of this investigation had been disclosed in the previous year, but not much was revealed about it.
There were a total of 29 requests that had been made for documents generated since 2017.
These covered the exchange’s sanctions and anti-money laundering compliance, finances, structure, business as well as management in the US.
Changpeng Zhao launched the Binance crypto exchange in 2017 in Shanghai, which controls almost half of the global crypto market, as of July.
The exchange has a trading volume of about $2 trillion a month, which has made it the world’s leading exchange.