The space is getting tighter and tighter for Binance as the latest report unveils its myriad of efforts to evade US regulations.
According to a report by the Wall Street Journal (WSJ) on Sunday, March 5th, text messages, documents, and interviews with the exchange’s former employees between 2018 and 2020 pack information about Binance’s efforts to evade US scrutiny as they were setting up Binance US.
Binance tried to avoid U.S. regulatory scrutiny with a bare-bones American platform that it said was wholly separate from its more complex global operation. But private messages show the two businesses have been much more intertwined. https://t.co/a1LZGxSQzs
— The Wall Street Journal (@WSJ) March 5, 2023
The report highlights that Binance and Binance US are more intertwined than they have disclosed. Both entities share staff, mix finances, and share “an affiliated entity that bought and sold cryptocurrencies.”
The management took several steps to prevent Binance from US regulatory oversight, including setting up an American entity that would attract enforcement and regulatory inquiries. This allowed the original Binance.com to operate in the US.
The newspaper wrote that Binance US software was developed and maintained by the same Chinese developers who developed Binance.com, thereby giving Binance access to US customers’ data. The report alleges that Binance mainly operated from China and Japan, yet a large number of its customers were based in the United States.
However, the management at Binance has maintained that Binance and Binance US are separate legal entities, and Binance has no US customers. There were mistakes in the early years but now Binance is completely a different platform.
Furthermore, between 2018 and 2019, Binance also approached the current SEC chairman Gary Gensler, a former CFTC chair and professor at MIT at that time, to serve the crypto firm as an advisor. The first meeting took place in October 2018, and the second in March 2019.
WSJ: In 2018 and 2019, Binance staff approached Gary Gensler, then a former Commodity Futures Trading Commission chair and now SEC chair, to become an adviser. They observed that while Gensler declined advisor-ship, he was generous in sharing license strategies.… https://t.co/Nu1QauM8Gu
— Wu Blockchain (@WuBlockchain) March 6, 2023
According to the report, Binance anticipated Gensler as a regulatory chair in case of Democrats’ victory in the 2020 presidential election. Gensler denied all offers and later became SEC chair in April 2021.
Regulators are All Over Binance
Regulatory scrutiny around Binance has intensified following Binance US’s bid to buy bankrupt crypto broker Voyager Digital. As reported, SEC has objected to the proposed deal, as it believes that Binance is not registered in the US.
Speaking at a bankruptcy hearing on the Binance-Voyager deal, SEC attorney said that they believe “Binance.US is operating an unregistered securities exchange in the United States.”
Furthermore, US Senators representing both Democrats and Republicans sent a letter to Binance.US President Brian Shroder and Binance CEO Changpeng Zhao that asks for more clarity on the exchange’s finances and regulatory compliance. The letter calls Binance “a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders.”
Binance has been under many regulatory investigations since 2020. As reported, Binance is bracing itself to settle these investigations.