Changpeng Zhao, CEO of Binance, speaks at the Delta Summit, Malta’s official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian’s, Malta October 4, 2018.
Darrin Zammit Lupi | Reuters
WASHINGTON — A bipartisan group of senators asked Binance, the world’s largest cryptocurrency exchange and once-competitor to bankrupt crypto giant FTX, for detailed information on its business operations amid accusations of illegal practices.
Sens. Elizabeth Warren, D-Mass., Chris Van Hollen, D-Md., and Roger Marshall, R-Kan., requested a slew of documents on company finances, compliance and risk management practices from Binance and its U.S. affiliate, Binance.US, in a letter dated Wednesday.
“In the years since Binance’s founding, the company has faced increasingly disturbing allegations regarding the legality of its operations,” the senators wrote in a letter addressed to Binance CEO Changpeng Zhao and Binance.US CEO Brian Shroder.
The Justice Department began a criminal investigation into Binance and Zhao in 2018 — the year after the company was launched — amid concerns the exchange defied U.S. anti-money laundering and sanctions laws. The agency has not decided whether to press charges against the company or individual executives.
A spokesperson for Binance told CNBC that the company looks forward to “correcting the record” about its operations. The person added that the exchange responds to questions from officials in jurisdictions that it operates to “both explain our business operations and cooperate with regulators.”
“Binance.com does not operate in the U.S., nor do we have U.S.-based customers, however, we appreciate the senators’ request and will provide information to help them better understand why we remain the most trusted platform with users across the globe,” the spokesperson added.
A Binance.US spokesperson separately said, “We welcome engagement with policymakers and look forward to responding to the Senators’ requests.” The person added that the company is “confident in the strength of our operations,” including its compliance practices and policy not to trade or lend customer funds.
Binance has become the definitive leader in the digital currency exchange industry since FTX filed for bankruptcy and its founder, Sam Bankman-Fried, stepped down in November. Bankman-Fried was later arrested and charged with defrauding investors, making unlawful political contributions and committing commodities fraud, among various other charges. Bankman-Fried has pleaded not guilty in the case.
In their letter, the senators outlined the Justice Department’s allegations against Binance, and contended the company has showed a lack of transparency.
They also accused Zhao of refusing to disclose the location or entity of his exchange “in what many regard as a blatant attempt to dodge the world’s financial regulators, serve ‘users without licenses,’ and violate anti-money laundering laws.”
The Securities and Exchange Commission also alleged Zhao used Binance.US as a shell company to distract U.S. regulators from illegal activities, including that it allegedly processed at least $10 billion in payments to criminals and U.S. sanctions evaders, the senators said in the letter.
“Mr. Zhao’s assertion that Binance.US is fully independent is eerily similar to claims Sam Bankman-Fried made regarding the distinction between FTX US and FTX – claims that appear to be false, given that FTX US has filed for bankruptcy, its users have lost access to their funds, and its new CEO has declared that it is, in fact, insolvent,” the letter states.
The senators requested a list of seven items, including complete copies of company balance sheets dating back to 2017, copies of internal anti-money laundering policies and any written policies on the relationship between Binance and Binance.US by March 16.
FTX’s collapse, which affected over 1 million investors, highlighted “the need for real transparency and accountability in the crypto industry,” the senators wrote.
“Binance is the world’s largest cryptocurrency exchange by volume, with over 120 million users globally, meaning that it is uniquely positioned to facilitate illicit financial transactions at an unparalleled scale, imperiling the savings of millions of everyday users,” they wrote.
