The U.S. Senate has initiated an investigation into Binance, the world’s largest cryptocurrency exchange, over a variety of alleged illegal activities. This news comes hot on the heels of a major crypto bank Silvergate (SI) delaying its annual report amid SEC investigation.
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In a strongly-worded March 1 letter, Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.) And Roger Marshall (R-Kan.) Sent to Binance CEO Changpeng Zhao and its U.S. affiliate Binance.US, the senators are looking into potential sanctions evasion, money laundering and unlicensed cash transmission.
“Your companies’ apparent attempts at avoiding the enforcement of anti-money laundering laws, securities laws, information reporting requirements, and other financial regulations cast serious doubt on the stability and legitimacy of Binance and its related entities, and on your commitment to your customers,” the senators wrote.
Binance boasts 120 million users, making it the largest crypto exchange by volume worldwide. Publicly-traded Coinbase Global (COIN), ranking second by volume, is followed by Kraken, which recently settled a $30 million fine.
The Senate letter claims that Binance has facilitated at least $10 billion in money laundering and sanctions avoidance for criminals or rogue countries, and that the exchange has been obscuring its financial information.
Binance Alleged Charges
The charges allege that Binance has been operating to evade U.S. regulators and that Binance.US is a “de facto subsidiary.” Binance.US is registered with the Treasury Department, but the exchange is not licensed to operate in the U.S. According to 2019 financial documents, Binance’s Cayman Islands holding company bought assets with $400 million and deposited them into an account at Silvergate Bank, a crypto-friendly bank which is now under investigation by the SEC.
The Senate letter also claims that Binance has been engaging in activities similar to those that have caused FTX to be under investigation, such as substantial transactions with high-risk jurisdictions.
In response to the accusations, Binance CEO Changpeng Zhao said the exchange “respectfully disagrees” with the senators’ accusations, calling them “inaccurate” and “misleading.” He also stated that Binance “complies with all applicable laws in the jurisdictions in which it operates.”
The investigation into Binance comes in the aftermath of Silvergate delaying its annual report, as the SEC is looking into the bank’s involvement with the exchange.
U.S. senators have accused cryptocurrency exchange Binance of facilitating money laundering and criminal activity, prompting Bitcoin and other digital currencies to retreat.
According to a letter sent by Senators Marco Rubio, Tom Cotton and Jeanne Shaheen, the firm has allegedly been responsible for laundering at least $10 billion in crypto to criminals, sanctions evaders and other illicit actors since its inception.
The report also alleges that Binance has attempted to recruit customers from countries deemed to be “high-risk” for money laundering, such as Russia and Ukraine. This has reportedly been going on since 2018 and has resulted in the firm being the focus of investigations by the Department of Justice.
The trio of senators has asked Binance and its related entities to provide financial and internal documents, as well as a list of all U.S.-based platforms which have used their services.
Bitcoin prices dropped 4.5% in the wake of the letter, while Ethereum declined by 4.2%. Meanwhile, Coinbase shares slid 4.7% in premarket trading and Silvergate saw a fall of more than 57%.
