Binance Double-Hit: Rumors of Being Chinese Company and Under Fire by US Feds

3 min read

Binance has been in the news quite a bit lately. Just three days ago the US Feds asked Binance to turn over records regarding their money-laundering investigation. Then find themselves defending themselves against accustions of being a Chinese company.

US Feds Money Laundering Probe

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.”

US Investigation

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.

Zhao Refutes Chinese Company Allegations

Changpeng Zhao, CEO of Binance, is addressing what he says are attacks on the crypto exchange’s reputation.

In a new blog post, the Chinese-Canadian billionaire says that Binance has been subject to multiple attempts to vaguely associate it with China and the Chinese government.

“Anyone with even a rudimentary knowledge of corporate law or how companies work will understand this: Binance was never incorporated in China. Nor do we operate like a Chinese company culturally. We have subsidiaries in many countries, including France, Spain, Italy, UAE (United Arab Emirates) and Bahrain (to name a few). But we don’t have any legal entities in China, and we do not have plans to. I believe it’s critical today that we come forward with these facts.

The greatest challenge that Binance faces today is that we (and every other offshore exchange) have been designated a criminal entity in China. At the same time, our opposition in the West bends over backward to paint us as a ‘Chinese company.’

The inference is that because we have ethnically Chinese employees, and perhaps because I am ethnically Chinese, we are secretly in the pocket of the Chinese government. We are an easy target for special interests, media, and even policymakers that hate our industry.

This is obviously not true.”

Zhao also says that he’s had his own conflicts with the Chinese government, including getting taxed at a 25% higher rate when purchasing a property for being a “foreigner,” as well as having to shutter a previous startup due to government policies.

The Binance CEO says that while the company’s business model may seem unorthodox relative to other big firms, he mentions that in an industry as nascent and fast-growing as crypto, it can be difficult to run a firm in a conventional manner.

“We are the largest crypto exchange and Web3 company on the planet. With that comes a great responsibility and an expectation of facing additional scrutiny. However, it’s important to remember that our industry is still in its infancy.

When your company suddenly goes from start-up to Fortune 100 overnight, nobody shows up at your office the next day with 1,000 experienced executives, streamlined processes, and technologies to suddenly operate like a two-hundred-year-old, established financial institution.

Like every other crypto exchange, growing and upscaling our staff and maturing our systems to match the growth of the industry has been the greatest challenge of my career. This is something that I have embraced and invested heavily in thus far.”

Featured Image: Shutterstock/iurii/Vladimir Sazonov

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