Binance Executive Documents Outline Plans to Avoid U.S.Scrutiny

Binance Executive Documents Outline Plans to Avoid U.S.Scrutiny

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The WSJ reported on Sunday that Binance developed plans to avoid the threat of prosecution by United States authorities when it started its American entity, Binance.US, in 2019.

The Wall Street Journal reported on Sunday that Binance, one of the world’s largest crypto exchanges, developed a plan to elude the threat of prosecution by U.S. authorities when it established its U.S. entity, Binance.US, in 2019. According to Reuters, the WSJ cited a Binance executive’s warning to colleagues in a 2019 private chat that any legal action brought by U.S. regulators would be akin to a “nuclear fall out” for Binance’s business and its officers.  

The WSJ report is grounded on texts and documents from Binance executives from 2018 to 2020, which were reviewed by the WSJ and interviews with several former Binance employees.

Binance and Binance.US More Intertwined Than Previously Disclosed

Reuters previously reported that Binance created Binance.US as a “de facto subsidiary” in 2019 to subvert U.S. regulators’ scrutiny from The WSJ report has now revealed that Binance and Binance.US are more intertwined than previously disclosed. The companies reportedly mixed staff and finances and shared an affiliated entity that bought and sold cryptocurrencies.

The report states that operated mainly from hubs in Japan and China, but a fifth of its customers were based in the U.S. The report further reveals that Binance developers in China maintained the software code that supported Binance.US user wallets which potentially have Binance access to U.S. customer data.

Binance and Binance.US Under Scrutiny Over Compliance

The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have investigated the relationship between Binance and its U.S. entity since 2020. The WSJ reports that if regulators prove that Binance has control over Binance.US, they could assert the power to oversee Binance’s entire operation.

A Binance spokesperson said in a statement to Reuters:

We have already acknowledged that we did not have adequate compliance and controls in place during those early years...we are a very different company today when it comes to compliance.

Apart from being under scrutiny from regulators since 2020, last week, three U.S. senators asked Binance and Binance.US for more information regarding their regulatory compliance and finances. Senators Elizabeth Warren, Chris Van Hollen and Roger Marshall sent a letter to the two companies calling on them “to provide transparency about potentially illegal business practice.” The letter added that Binance and its U.S. affiliate “have purposefully evaded regulators, moved assets to criminals and sanctions evaders, and hidden basic financial information from its customers and the public.”

Forbes Claims Binance Moved $1.8B in Collateral to Hedge Funds

Binance came under further fire last week when a controversial Forbes report claimed that Binance moved around $1.8 billion of collateral meant to back customer assets to various hedge funds. The Forbes report accused Binance of committing acts similar to those that brought down the infamous FTX exchange. Binance, of course, denied any such claims. Forbes bases its claims after exploring the on-chain activities of Binance, which revealed the transfer of $1.78 billion worth of collateral to various hedge funds.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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