Binance, the world’s largest cryptocurrency exchange, is under investigation by a laundry list of US government agencies, including the US Justice Department, the Internal Revenue Service, and the Commodity Futures Trading Commission, according to a report by Bloomberg. The agencies are probing Binance for potential criminal violations, the report says, though the company has not been accused of any wrongdoing.
The investigations come on the heels of a report by Chainalysis that traced $2.8 billion worth of illicit bitcoin on exchange and trading platforms. Of that, $756 million went through Binance. Most of the suspect accounts received small amounts, but the majority of the illicit cryptocurrency flowed to a few hundred accounts that received between $100,000 to $100 million. Government officials are said to be focused on money laundering and tax evasion.
The recent ransomware attack on the Colonial Pipeline that led to gasoline shortages has sharpened the focus on cryptocurrencies’ role in illegal activities. In that case, it’s reported that Colonial paid the attackers $5 million to return control of the pipeline’s operations. In another, a ransomware gang recently posted personnel records from District of Columbia’s Metropolitan Police Department after the department didn’t cave to their demands of a $4 million ransom. The group, known as Babuk, is behind other ransomware attacks and frequently requests payment in bitcoin.
Among cryptocurrency exchanges, Binance is a giant. In the last 24 hours, over $60 billion in trades flowed through Binance, more than triple its nearest competitor, Huobi, and far outpacing the US-domiciled Coinbase. Binance has risen quickly since its founding by CEO Changpeng Zhao in 2017 in Hong Kong. Today, the company is incorporated in the Cayman Islands and has an office in Singapore but reports that it has no official headquarters.
IRS agents have been investigating Binance for months, Bloomberg reports, and they are apparently scrutinizing both account holders and employees of the company. The CFTC is looking into whether Binance allowed Americans to trade illegally on the platform—US residents cannot trade cryptocurrency derivatives unless the company offering them is registered with the agency. And the Justice Department has reportedly assigned the investigation to its bank integrity unit, which handles particularly complex cases.
This isn’t the first time Binance’s name has appeared in criminal probes. Earlier this year, the company appeared in two separate criminal cases, though it was not accused of wrongdoing in either. In one case, in February, two Florida men were caught running an online fentanyl ring, and prosecutors alleged that one deposited the proceeds into a Binance account. In the other, federal prosecutors demanded the forfeiture of nearly $450,000 in cryptocurrencies held by a 20-year-old Ukranian, who had exchanged the bitcoin for Tether, the cryptocurrency that was formerly pegged to the dollar.
Another cryptocurrency exchange, BitMEX, was charged in October for violating the Bank Secrecy Act. The exchange allegedly allowed thousands of US customers to trade on the exchange even though the company claimed they could not. Three company officials have pleaded not guilty and a fourth is still at large.