US subpoenas hedge funds in crypto exchange Binance probe: Superstonk

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“Federal prosecutors are looking into US hedge fund transactions with cryptocurrency exchange Binance in a long-running investigation into potential money laundering violations at one of the top crypto companies. in the world.

“In subpoenas issued in recent months, the U.S. Attorney’s Office for the Western District of Washington in Seattle ordered investment firms to turn over records of their communications with Binance, according to two people, who each reviewed the a subpoenas and spoke on condition of anonymity to discuss the confidential matter.

The subpoenas, which have not previously been reported, do not necessarily mean authorities are likely to bring charges, legal experts said. Prosecutors are still discussing a possible settlement with Binance and assessing whether they have enough evidence to bring charges against the company, Reuters reported last month.

In an interview, Binance Chief Strategy Officer Patrick Hillmann said the company talks to virtually every regulator in the world on a daily basis, but declined to comment on the status of any US investigation. Joshua Stueve, a Justice Department spokesman, also declined to comment.

The federal investigation into Binance comes at a time of deep uncertainty in the crypto industry. The implosion of FTX, a popular trading platform that authorities say was a years-long scheme to defraud investors, has fueled concerns about the freewheeling and largely unregulated online markets where digital assets are bought and sold.

Crypto business failures are increasingly common and interconnected. Celsius, a crypto platform that collapsed in July, lent a lot to FTX subsidiary Alameda Research, which went bankrupt five months later. Binances Founder and CEO Changpeng Zhao was an early backer of FTX, and his decision to sell off a large portion of the company’s digital tokens helped spark panic among customers and sparked operate on bank deposits that FTX could not satisfy.

As attention shifts to Binance, the world’s largest crypto exchange, Zhao lashed out at critics of FTX and cast himself as a champion for tighter industry oversight. Regulators will rightly scrutinize this industry much, much harder, which is probably a good thing, Zhao told a conference in Indonesia in November.

Binance, however, has long frustrated financial regulators and law enforcement, legal experts said. For years, Binance has allowed users to buy and sell cryptocurrencies on the platform without identifying themselves, making it an easy way for criminals to launder ill-gotten money, said John Ghose, a former Justice Department prosecutor specializing in cryptocurrency cases before leaving to join the private sector in 2021.

During his tenure as prosecutor, Ghose said, Binance did not have a reputation as a responsible exchange.

Binances Hillmann acknowledged that the company had shortcomings in its approach to regulatory compliance during the early years of its rapid expansion. But more recently, he said, Binance has invested heavily in compliance programs, worked closely with law enforcement, and developed new technology to catch criminals on its platform.

Over the past two years, the company has completely changed its posture, Hillmann said. Now that we have these resources, we are easily one of the most proactive parties in identifying, freezing and recovering funds laundered by criminals, he said, adding that he believed the overall incidents of activity criminal in crypto were down.

A report released last year by data provider Chainalysis showed that cryptocurrency crime hit an all-time high in 2021, with illicit addresses receiving $14 billion, up from $4.6 billion in 2017. the year Binance was created. During the same period, as crypto adoption exploded, the share of illicit global transactions declined significantly, Chainalysis found.

Based on his experience with these types of cases, Ghose believes prosecutors are looking into whether Binance violated the Bank Secrecy Act, which requires financial institutions to verify the identity of their customers and report any suspicious activity. could be a sign of money laundering, tax evasion. or other offences.

Recent subpoenas could mean prosecutors are looking into Binances’ dealings with U.S. investors, said Ghose, who cautioned he had no direct knowledge of the Binance investigation.

The basis for that fee is whether there are US customers, he said. If there are US customers, there are fees to avoid money laundering requirements.

Zhao is trying to do the right thing by meeting with government leaders, advocating for regulation and offering to bail out other struggling crypto firms, said Carlos Gomez, chief investment officer at Belobaba Crypto Asset Fund, which invests on the Binance platform. He tries to position himself as a trustworthy person.

Baucus and Plouffe did not respond to requests for comment.

Meanwhile, Binance.US, a Palo Alto, Calif.-based trading platform owned by Zhao, has hired two new outside lobbying firms and launched a political action committee, allowing it to raise funds from its own ranks and distributing profits in the form of campaign contributions, federal records show. And he hired former FBI agent BJ Kang, who led high-profile insider trading investigations on Wall Street, as its first head of investigations.

A Binance.US spokeswoman said the company is not currently considering making PAC donations.

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