Less than 24 hours after Musk’s lament that Bitcoin is “environmentally unfriendly” sent shockwaves through the cryptocurrency market, the hot but largely unregulated sector is once again in the red.
The U.S. Department of Justice and the IRS are investigating Binance, the world’s largest crypto exchange, for issues related to money laundering and (illegal) tax avoidance, according to U.S. media reports Thursday, and law enforcement agencies have now obtained some information through people who know Binance’s business. While both organizations have the authority to investigate potential violations, not all investigations will turn into formal charges.
Bitcoin briefly dipped touching the $47,000 mark and Binance coin (BNB) briefly dipped more than 10% on the related news.
(BNB/USD five-minute chart, source: TradingView)
According to sources familiar with the matter, those specifically involved in the Binance investigation include prosecutors from the U.S. Department of Justice’s Bank Integrity Unit, which is responsible for investigating complex cases involving financial institutions, as well as investigators from the Seattle District Attorney. The IRS investigation has been ongoing for several months, and the questions they have asked people with knowledge of the investigation indicate that Binance customers and employees are among those being investigated.
About two months ago, it was also rumored that the U.S. Commodity Futures Trading Commission (CFTC) investigated whether Binance allowed U.S. investors to illegally buy and sell derivatives related to digital pass-throughs, and that under the relevant law, Americans cannot buy such underlying that is not registered with the CFTC.
Binance response: Things are not as bad as the news headlines make it out to be
In response to the media reports, Binance Exchange responded by saying that the company takes its legal obligations very seriously and works in a collaborative manner with regulatory and law enforcement authorities. The company has been working to build a robust compliance program that combines anti-money laundering principles with the tools financial institutions use to detect and address suspicious activity. Meanwhile Binance has a proven track record of assisting law enforcement agencies around the world, including the US.
Founder Changpeng Zhao also said on social media that the headline of the “news” looks bad, but the content is not that bad. The story describes how Binance is working with law enforcement agencies to crack down on bad players, but somehow it looks like a bad thing.
(Source: Social Media)
Regulation requires proof of US user involvement
Not only is there a lack of regulatory framework for cryptocurrency exchanges for the relevant authorities to investigate, but the way the industry as a whole operates also makes it significantly more difficult to investigate. In the case of Binance, for example, although the company is established in the Cayman Islands and has an office in Singapore, the company has made it clear that there is no such thing as a headquarters.
Meanwhile, for US regulation, any investigation into Binance would at least require proof that the company provides services to US citizens. For its part, Binance has always stressed its strict compliance with U.S. law, which prohibits Americans from using the site, and uses advanced technology to analyze signs of illegal behavior such as money laundering. The platform also publicly stated last year that it would take measures such as blocking Americans if they were found to be trading on the platform.
According to people familiar with the matter, some U.S. customers were advised to use a network of virtual proxies to disguise their location before Binance U.S. A Binance spokesman responded that the company had never encouraged U.S. citizens to use such methods to circumvent company rules. In January, Binance founder Zhao Changpeng also said on social media that Binance’s systems would prohibit Americans from connecting even if they used this method.
It is worth mentioning that Binance has also recruited many people familiar with US regulation in recent years. Brian Brooks, former acting director of the Office of the Comptroller of the Currency (OCC), has been CEO of Binance USA since this month, and Max Baucus, former chairman of the U.S. Senate Finance Committee and former U.S. ambassador to China, became Binance’s government relations advisor in March.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/binance-exchange-rumored-to-face-u-s-justice-department-irs-investigation-re-raising-shocks-in-cryptocurrency-market/
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