3 months ago 2 min read

Hedge Funds are Subpoenaed by US Investigators in Binance Money Laundering Investigation

binance-ftx-changpeng zhao

Authorities have not filed any charges against the business, which has been under under scrutiny after a rival, FTX, collapsed.

Federal prosecutors are looking at Binance's connections to American hedge funds as part of a larger probe into the cryptocurrency exchange's potential circumvention of anti-money laundering laws.

The U.S. is in charge of the probe. According to two sources who have reviewed one of the subpoenas, the Attorney's Office for the Western District of Washington in Seattle has recently sent subpoenas to businesses asking records of their interactions with Binance.

The subpoenas are issued at a time when Binance, the largest cryptocurrency exchange in the world based on daily trading volume, is under increasing media and regulatory scrutiny regarding its operational procedures and financial statements. After FTX's multi-billion dollar collapse, which shook investor confidence in a volatile and fragile crypto market, that scrutiny reached a boiling point late last year.

The subpoenas do not necessarily indicate that authorities will file charges against Binance or its founder and CEO Changpeng "CZ" Zhao, according to the Post, as they are currently in talks with Binance about a potential settlement and determining whether they have enough evidence to file charges.

Legal experts who talked to the Post claim that Binance has a history of getting around rules and exploiting legal loopholes to continue operating its business in governments all around the world. According to a former DOJ prosecutor cited by the Post, lawmakers expressed alarm over the platform's potential role in money laundering due to the company's prior lack of identification requirements. Binance was allegedly used as a "hub for hackers, scammers, and drug traffickers" with ties to the Russian dark web marketplace Hydra, according to a Reuters story from the previous year.

Some have also criticized the company's financial reporting as being obscure. There isn't much on-chain [info], any kind of financial access, or transparency into [Binance's] entities, according to a representative of the blockchain data analytics firm Nansen who told TV's "First Mover" last month.

Binance has recently made measures to strengthen its commitment to compliance, planning to hire 500% more security and compliance personnel by 2022. Additionally, the business established a worldwide advisory board last October, which is presided over by Max Baucus, a former Democratic senator from Montana. The exchange, which has just started participating in crypto lobbying in Washington, DC, appears anxious to strengthen its ties with the federal government of the United States.

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