US probes links between hedge funds and Binance

U.S. authorities have taken an interest in the relationship between American hedge funds and Binance as part of investigations into possible violations of anti-money-laundering rules. This, according to The Washington Post.

According to sources, the office of the U.S. attorney for the Western District of Washington in Seattle has, over the past several months, issued subpoenas to investment firms. Law enforcement agencies have requested reports on their dealings with Binance.

The subpoenas do not necessarily mean that authorities will file charges against the exchange or its founder and CEO Changpeng Zhao, experts from The Washington Post noted. According to Reuters, the U.S. Department of Justice is weighing such a possibility, but also allows for out-of-court settlements.

Binance’s Chief Strategy Officer Patrick Hillmann noted that the company “actually communicates with regulators around the world on a daily basis.” He declined to comment on the status of any investigations in the United States.

As the world’s largest crypto-trading platform, Binance drew the attention of law enforcement and regulators because of the absence of Know Your Customer — know your customer rules for many years. KYC.

According to Reuters, from 2017 to 2021, hackers laundered through the exchange at least $2.35 billion of funds obtained illegally. Among them were assets linked to the darknet marketplace Hydra and the North Korean hacking group Lazarus.

“Binance lacked a reputation as a responsible exchange,” said former prosecutor John Goetz.

Hillmann admitted that the company had compliance shortcomings in its early growth years. But he noted that Binance later funded compliance programmes and cooperated with law enforcement.

“Over the past two years the company has completely changed the situation. Now that we have these resources, we can readily identify, freeze and return funds as a proactive party,” Hillmann said.

Drawing on his experience, Goetz suggested that prosecutors are investigating potential violations of Binance’s Bank Secrecy Act. The Act requires financial institutions to identify customers and report suspicious activity that may indicate money laundering, tax evasion and other violations.

In Goetz’s view, the subpoenas indicate that authorities have taken an interest in Binance’s relations with American investors. The exchange’s global platform regards the United States as a region where access to trading is restricted. The company opened in the United States a branch with a limited product offering. For example, the platform lacks a number of speculative derivatives that are illegal in the United States.

Many Americans say they circumvent Binance’s restrictions, The Washington Post notes. There is a surge of advice on social media on how to do this. A blogger going by the handle Full Value Dan posted a YouTube video titled “How I did Binance KYC.”

The instructions involve setting up a business in Taiwan and using documents of a resident of that jurisdiction. According to him, he successfully used such a route while being an American citizen.

Hillmann said the company tested both this and other loopholes and found they did not work.

“To date, no US-based user can access Binance.com without engaging in fraud,” he stressed.

On the corporate level, one of the investment firms surveyed by the publication with assets of $2.5 billion admitted that it trades on the exchange’s global platform through a structure registered outside the United States. Most firms said they use Binance.US or prefer Coinbase.

In 2022, Binance’s user base reached 120 million people. The team grew to 7,500 employees, of whom 10% work in compliance, according to Changpeng Zhao.

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