US Federal prosecutors have asked cryptocurrency exchange, Binance, to reveal internal records and communications involving its CEO Changpeng Zhao related to its money-laundering probe, Reuters reported.
The Justice Department has asked the exchange to turn over communications between Zhao and other executives regarding the “unlawful transactions” and recuitment of clients in the US.
Four people with knowledge of the probe said the Department’s investigation into Binance’s compliance with US financial crime laws included the December 2020 request, which had not previously been publicised. According to the persons, US officials are looking into whether Binance broke the Bank Secrecy Act.
If crypto exchanges perform “significant” business in the US, they must register with the Treasury Department and adhere to anti-money laundering regulations. The statute, intended to safeguard the American financial system from criminal financing, allows for a 10-year prison term.
The Department’s letter to Binance made 29 distinct requests for papers related to the company’s management, organisational structure, financial situation, compliance with anti-money laundering and sanctions laws, and US operations since 2017. “Binance is requested to produce all documents and materials that are responsive to this letter in its possession, custody, or control,” it said.
The request indicates the extensive nature of the US inquiry into Binance. Bloomberg, which had revealed about the probe last year, quoted a Binance representative saying at the time: “We take our legal obligations very seriously and engage with authorities and law enforcement in a collaborative fashion.”
The Justice Department has been cracking down on the unregulated crypto market this year, as people lost huge amounts of money after the market crashed. The government is mainly concerned about the money laundering aspect in the cryptocurrency space. It has been observed that cybercriminals were using cryptos to launder the stolen money from hacks and evade the law.
Authorities are clamping down heavily on crypto mixers by sanctioning specific wallet addresses. Criminals were found to be using crypto exchanges and mixers to dodge the authorities’ radar.
In a blog post, CEO Zhao wrote: “We don’t have any legal entities in China”, although Binance started operations in that country. He added that “The greatest challenge that Binance faces today is that we (and every other offshore exchange) have been designated a criminal entity in China.”
Financial regulators in many countries have issued warnings against Binance since last year, alleging it was either serving users without licences or violating anti-money laundering standards.
The Dutch central bank in July fined Binance over three million Euros for violating the country’s financial laws. A Binance spokeswoman claimed at the time that the fine was a “pivot in our ongoing collaboration” with the central bank.