Binance Faces Growing Pressure as US Crypto Crackdown Intensifies

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A Canadian citizen of Chinese descent, Mr. Zhao has hopped from country to country and now splits much of his time between Dubai and Paris, according to a person familiar with the matter. Mr. Zhao has visited the United States at least once in 2022, the person said.

Binance has long been dogged by allegations that it circumvented global money laundering rules and sought to evade regulations in the countries where it operates. At times, the private exchange operated from China, Malta and Singapore; a spokesperson said the company now has major regional offices in Dubai and Paris, with 8,000 full-time employees worldwide.

Binance is not licensed to operate in the United States, so Mr. Zhao has a small business for US users called Binance.US., which says it operates separately from the global exchange. But the company’s US-based customers were able to access the main platform using virtual private networks to conceal their whereabouts.

Binance has been under US regulatory scrutiny for years. In February, Patrick Hillmann, its chief strategy officer, disclosed that the exchange was in talks with regulators over a settlement to resolve the various legal investigations with a fine or other sanction. He said the company was very confident and felt really good about the talks.

A month later, the CFTC filed its lawsuit.

The agency sued Binance subsidiaries based in the Cayman Islands and Ireland, claiming these companies were directly or indirectly owned by Mr. Zhao and related to dozens of other business entities run by the exchange. The complaint said Mr. Zhao was personally responsible for Binances’ compliance failures, describing a meeting in which he admitted to a loophole that allowed users to circumvent know-your-customer protocols.

The CFTC has also sued Binances’ former top compliance officer, Samuel Lim, claiming he helped US customers evade systems designed to prevent money laundering. A lawyer for Mr. Lim did not respond to requests for comment.

The lawsuit added that Binance had allowed three unnamed US trading companies to operate on its platform, despite rules prohibiting US companies from doing so. The companies were Jane Street Group, Tower Research Capital and Radix Trading, according to a person familiar with the matter. There is no indication that the companies, previously identified by Bloomberg News, are under investigation by federal authorities.

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