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Top crypto exchange Binance under federal investigation — here’s why

Binancecoin
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Binance, the world’s largest and most-used cryptocurrency exchange, is reportedly under investigation by multiple U.S. government agencies for potential criminal actions.

According to Bloomberg, the exchange is being probed by the U.S. Department of Justice and Internal Revenue Service (IRS) in relation to possible money-laundering and tax-related offenses. The report claims that officials from both agencies have sought information regarding Binance’s business dealings, and that they are exploring potential wrongdoing by both the exchange’s employees and customers.

Although specific details about the investigation are thin, the report claims that the U.S. government is wary of the use of cryptocurrency in relation to criminal acts, such as for money laundering and ransomware attacks. Additionally, the IRS has started cracking down on potential tax evasion offenses related to cryptocurrency trades.

“We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion,” Binance spokeswoman Jessica Jung told Bloomberg, in a statement. “We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.”

Founded in 2017, Binance rapidly became the most-used exchange for cryptocurrency trading, supporting a wide array of coins and led by outspoken crypto advocate Changpeng “CZ” Zhao, who commands a large social media presence. Binance is incorporated in the Cayman Islands and has offices in Singapore, but claims no official headquarters.

In a tweet Thursday, Zhao denied wrongdoing on Binance’s part and suggested that the report mischaracterized the agencies’ interactions with the exchange.

“The ‘news’ title is bad,” he tweeted. “Article itself isn't so bad actually (but who reads). It described how @binance collaborated with law enforcement agencies to fight bad players, but somehow made it look like a bad thing... Anyways. Back to work.”

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According to CoinMarketCap, Binance has handled nearly $55 billion in trading volume over the last 24 hours, almost three times higher than the next-highest exchange (South Korea’s Upbit).

In 2020, Binance launched spinoff exchange Binance.US to comply with United States regulations, and began freezing accounts of U.S. traders on its main exchange. Binance.US handles far less daily trading: about $1.7 billion over the last 24 hours.

In March, Bloomberg also reported that Binance is currently under investigation by the United States Commodity Trading Futures Commission (CTFC) for allowing US traders to buy and sell derivatives.

In October, meanwhile, a Forbes report claimed that a leaked internal Binance document detailed strategies to evade regulation. In response, the exchange sued the publication, but ultimately dropped the suit in February. According to crypto analytics platform Chainalysis, Binance also led the list of exchanges receiving illicit Bitcoin (BTC) tied to criminals in 2019.

In addition to its exchange, Binance also operates the Binance Coin (BNB), which has surged more than 15 times in value since the start of 2021 to become the third most-valuable cryptocurrency, in terms of market cap. Alongside BNB’s recent success is the rising profile of the Binance Smart Chain, a blockchain platform the supports decentralized apps (dapps) including popular decentralized exchange (DEX) PancakeSwap.

Binance Coin’s price was down yesterday (May 13), along with much of the rest of the cryptocurrency market, which was recoiling in part due to Tesla’s announcement Wednesday that it would no longer accept Bitcoin as payment for cars. However, many of the top coins have rebounded today, and BNB’s price is up 6.5% to about $600 per coin, according to CoinGecko.