Federal prosecutors are currently evaluating U.S.-based hedge funds’ associations with the world-renowned Binance cryptocurrency exchange as part of a prolonged investigation into potential money-laundering infractions, according to a report by The Washington Post on January 7th.
The U.S. attorney’s office for the Western District of Washington in Seattle recently issued subpoenas to several investment firms, requesting them to provide records of their communications with Binance.
This information was disclosed by two anonymous sources who have reviewed the subpoenas. These sources spoke on the condition of anonymity due to the confidential nature of the matter.
According to the Washington Post, Legitimate specialists proposed that the subpoenas, which had gone undisclosed until now, do not guarantee that agents are prepared to lay charges.
Reuters reported this past month prosecutors are contemplating a potential agreement with Binance while deciding if they have sufficient evidence to present indictments against the company.
On this, the company’s chief strategy officer, Patrick Hillmann, stated that the company is in frequent communication with regulators worldwide but declined to comment on the status of any U.S. investigation.
Additionally, a Justice Department spokesperson, Joshua Stueve, refused to make a statement in regard to the ongoing federal investigation into Binance.
This comes at an unpredictable time for the cryptocurrency sector after FTX’s dramatic downfall from alleged fraudulent activities.
Criticism On Binance Regarding Money Laundering
The failure of cryptocurrency company Celsius in July has led to increasing interconnections with other crypto failures. Celsius had lent heavily to FTX affiliate Alameda Research, which went bankrupt five months later.
Binance’s CEO Changpeng Zhao, an early backer of FTX, sold off a large amount of the company’s digital tokens, leading to a customer panic and a run on bank deposits that FTX could not meet. As attention turns to the largest crypto exchange, Zhao has criticized FTX and called for stricter industry oversight.
Financial regulators and law enforcement have previously criticized Zhao’s exchange for allowing users to buy and sell cryptocurrency on its platform without identification, making it easy for people to launder money.
Binance has recently invested in compliance programs and worked closely with law enforcement to prevent criminal activity on its platform. However, a report by Chainalysis showed that cryptocurrency crime hit an all-time high in 2021, with illicit addresses receiving $14 billion.
It is not clear if Binance is being investigated for violating the Bank Secrecy Act, which requires financial institutions to verify customer identities and report suspicious activity.
Moreover, in response to regulatory interest, Binance has formed a global advisory board and joined the Chamber of Digital Commerce, a crypto lobbying association. Binance.US, a trading platform owned by Zhao, has hired two outside lobbying firms and launched a political action committee.
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