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Binance Faces Scrutiny as Senators Request Information on Business Operations – Crypto Clampdown Incoming?

Ruholamin Haqshanas
Last updated: | 2 min read
Source: AdobeStock / JorgeEduardo

Three US senators have asked Binance and its US partner Binance.US to provide detailed information regarding their business operations amid accusations of illegal practices.

In a letter dated Wednesday, Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), and Roger Marshall (R-Kansas) asked Binance “to provide transparency about potentially illegal business practice,” while accusing the exchange of being a “hotbed of illegal financial activity.”

The letter, addressed to Binance CEO Changpeng Zhao and Binance.US CEO Brian Shroder, requested details of the company’s balance sheets, internal procedures, compliance and risk management practices, and any communications about alleged efforts by CZ to limit compliance.

“In the years since Binance’s founding, the company has faced increasingly disturbing allegations regarding the legality of its operations,” the letter said, citing a series of investigations by Reuters and some other media reports.

The senators added that the exchange and its related entities have “purposefully” evaded regulators, facilitated the transfer of assets to criminals and sanctions evaders, and concealed basic financial information from its customers and the public.

The letter also touched on the catastrophic collapse of FTX, once the third-largest cryptocurrency in the world that failed in November last year, saying that it “underscored the need for real transparency and accountability in the crypto industry.”

In a comment to CryptoNews.com, a Binance spokesperson said “a lot of misinformation has been spread about our company, including in several of the articles heavily cited in the letter, and we look forward to correcting the record in our official response.” 

Meanwhile, a spokesperson for Binance.US said:

“We welcome engagement with policymakers and look forward to responding to the Senators’ requests. We are confident in the strength of our operations, including our BSA/AML practices, broader compliance programs, and policy of maintaining 1:1 reserves and never trading or lending out customer funds.”

Binance Probe Dates Back to 2018

In December last year, Reuters reported that CZ could face charges for money laundering conspiracy and other violations in the US. As per the report, Binance has been under investigation by the DOJ since 2018. The investigation is reportedly focused on money laundering conspiracy, unlicensed money transmission, and criminal sanctions violations.

The agency has not decided whether to press charges against the company or individual executives. A potential plea deal has reportedly been discussed between the DOJ officials and Binance attorneys. 

Earlier this year, the U.S. attorney’s office for the Western District of Washington in Seattle sent subpoenas to investment firms tied to Binance, asking them to share records of their communications with the platform. 

And more recently, a report claimed Binance commingled different investors’ funds last year in a move “eerily” similar to actions by FTX. Per the report, Binance moved $1.8 billion of collateral set to back its customers’ stablecoins late last year, putting the assets to other undisclosed uses.

The report came after Binance admitted last month that it kept collateral for its BNB Smart Chain and BNB Beacon Chain versions of 94 crypto assets in the same wallet as customer funds. The commingling makes it hard for customers and researchers to identify whether the exchange has enough assets to honor redemption requests 1:1.