According to US prosecutors, Binance is accused of processing approximately $275 million in deposits and withdrawals to BestMixer, a cryptocurrency “mixing” service that aimed to obscure cryptocurrency transactions. The Dutch law enforcement closed down this service in May 2019 due to a money-laundering investigation. The charging document also alleges that Binance users included ransomware groups, hackers who had stolen crypto from other exchanges, and scammers. US treasury secretary Janet Yellen highlighted at a press conference that Binance facilitated transactions with terrorist groups, including Hamas, and distributors of child sexual abuse material, both of which are designated as terrorist activities by the US.
The prosecutors claim that for years after its establishment in 2017, Binance had minimal know-your-customer requirements, violating US money-laundering laws, despite providing services to US users. The indictment against Zhao accuses him of promoting the company to operate in a “grey zone” and suggesting that it was “better to ask forgiveness than permission.”
Even after Binance seemed to implement stricter know-your-customer rules for users in 2021, the indictment alleges that the company often disregarded sanctions violations or knowingly allowed users to bypass its money-laundering checks. The indictment asserts that over 12,500 users listed Iranian phone numbers on their accounts but were still permitted to trade on the exchange.
There are internal communications cited in the indictment where Binance staff expressed reluctance in acknowledging Iranian users and even prompted VIP users to be cautious with their funds, particularly from darknet markets like hydra. In one instance, a compliance executive supposedly made a joking reference to the difficulty of laundering drug money.
Speculations and reports of Binance’s use by criminals have circulated for years. In a report published by Reuters in June 2022, it was claimed that Binance had facilitated over $2.35 billion in money laundering by hackers and drug traffickers, which was denied by Binance. Similarly, in December of the previous year, Reuters reported that the Department of Justice was contemplating criminal charges against the company.
These charges and settlement follow the conviction of Sam Bankman-Fried, the former CEO of FTX, which was once a major rival of Binance as one of the largest cryptocurrency exchanges globally. At a press conference, Garland remarked, “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: Using new technology to break the law does not make you a disruptor, it makes you a criminal.”