According to a report from Reuters, the CEO and founder of the world’s largest crypto exchange Binance, Changpeng “CZ” Zhao, was under investigation by U.S. federal prosecutors. Launched in 2020 by the Justice Department, authorities in the country were seeking information about the company’s anti-money laundering activity.
The federal prosecutors requested the crypto exchange for its collaborate with the investigation and asked it to surrender communication between Zhao and 12 other executives, Reuters claims. The probe looked into the platform’s mechanism to prevent illegal transactions and its operation related to U.S. customers.
As seen below, per data shared by Zhao, Binance is the leading exchange per spot trading volume surpassing competitors such as Coinbase, FTX, and others. At its high, Binance was processing over $1,500 billion in trading volume. Its operations are separated into Binance and Binance.US for customers based in this country.
Reuters said that the 2020 probe was reported at the time, but the details remained unknown until now. The Justice Department requested documents about Binance’s compliance with the U.S. Bank Secrecy Act, the employees responsible for complying, the exchange’s action to prevent illegal finance, and suspicious financial activity.
In addition, the Justice Department asked for documents to understand the “business rationale” for the creation of the U.S. Binance subsidiary. According to the Reuters report, there is no information about how the crypto exchange addressed the Justice Department, but when the news about the probe broke a Binance spokesperson said that they are always collaborating with authorities.
In that sense, Binance Chief Communication Officer Patrick Hillmann said the following talking about the probe:
Regulators across the globe are reaching out to every major crypto exchange to better understand our industry. This is a standard process for any regulated organization and we work with agencies regularly to address any questions they may have.
Reuters claims the probe requested documents as far back as 2017 and details about Binance’s structure, finances, sanctions compliance, management, and more. The report claims that Binance’s corporate structure is “opaque” as the company has refused to provide information about the location of its operations.
As the largest crypto exchange, Binance has attracted unwanted attention. In addition to the Justice Department probe, the Securities and Exchange Commission (SEC) sent a subpoena to the company’s U.S. subsidiary for information about its services and employees.
In 2022, the SEC launched another investigation against the exchange’s native token Binance Coin (BNB). The Commission believes the company might have violated its securities law by allegedly offering BNB as unregistered security during its Initial Coin Offering (ICO).
Both the actions of Binance and of U.S. authorities have been questioned over the years. The company claims to be making an effort to comply with regulations. On the SEC probe, legal expert Collins Belton said:
It’s been 5 years and it’s market cap is higher than most US companies, why wait this long to take potential action if you’re concerned about potential harm? Letting things balloon only to prick it once massive seems like a recipe for inducing consumer harm rather than staving it off.
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