Texts, Documents Reveal Binance Planned to Avoid US Scrutiny: Report

Binance, one of the world’s largest cryptocurrency exchanges, developed a plan to avoid the threat of prosecution by US authorities as it started an American entity in 2019, the Wall Street Journal reported on Sunday.

Any lawsuit from US regulators, who had signaled a coming crackdown on unregulated offshore crypto players, would be like “nuclear fall out” for Binance’s business and its officers, the WSJ said, citing a Binance executive’s warning to colleagues in a 2019 private chat.

The report is based on messages and documents from 2018 to 2020 reviewed by The Wall Street Journal as well as interviews with former employees.

Binance, founded in 2017, and Binance.US are more intertwined than the companies have disclosed, mixing staff and finances, and sharing an affiliated entity that bought and sold cryptocurrencies, the report said.

It noted that Binance.com operated mainly from hubs in China and Japan, yet a fifth of its customers were based in the United States. Binance.US is based in San Francisco.

Binance developers in China maintained the software code that supported Binance.US users’ digital wallets, potentially giving Binance access to US customer data, the WSJ reported.

Since 2020, the Department of Justice and Securities and Exchange Commission have been investigating Binance’s relationship to Binance.US, the report said, citing subpoenas and people familiar with the matter. If U.S. regulators determine that Binance has control over its U.S. entity, they could claim the power to police Binance’s entire business.

In an emailed statement to Reuters, a Binance spokesperson said, “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.”

Binance.US, the SEC and DOJ did not immediately respond to Reuters’ requests for comment.

Binance is under heightened scrutiny as three U.S. senators this week asked the giant cryptocurrency exchange and Binance.US for information about their regulatory compliance and finances.

Reuters has reported that Binance.US was created as a de facto subsidiary in 2019 to draw the scrutiny of US regulators away from Binance.com.

© Thomson Reuters 2023