Department of Justice Unveils Comprehensive Oversight of Binance Activities

DOJ Reveals Binance’s Commitment toward Compliance

The United States Department of Justice (DOJ) recently unveiled Binance’s compliance commitments on December 8, shedding light on extensive government oversight of the cryptocurrency exchange’s operations. A comprehensive analysis by John Reed Stark, a former Securities and Exchange Commission (SEC) official, characterizes Binance’s newly outlined compliance obligations as resembling a “consulting firm’s wish list,” potentially signaling challenges ahead for the platform.

The detailed 11-page document outlines Binance’s commitment to cooperate with authorities, granting them access to documents, records, and resources upon request. This access extends to information concerning not only the exchange itself but also its “former employees, agents, intermediaries, consultants, representatives, distributors, licensees, contractors, suppliers, and joint venture partners,” according to Stark’s analysis.

Several divisions within the DOJ’s criminal arm are set to closely monitor Binance’s activities, including sections specializing in:

• Money laundering and asset recovery
• National security
• Counterintelligence
• Export control
• Office for the United States Attorney in the Western District of Washington

The agreement also reveals that Binance’s plea deal with the U.S. government involves five years of oversight by the Financial Crimes Enforcement Network (FinCEN). This unprecedented level of scrutiny is expected to come at a significant financial cost, as Binance will be obligated to provide instantaneous access, audit, and examination. This will also include inspection by the DOJ, FinCEN, and various financial regulators and law enforcement agencies.

Stark describes this level of oversight as subjecting the company, and by extension, its customers, to a continuous “financial colonoscopy” year-round. Binance and its former CEO, Changpeng “CZ” Zhao, acknowledged violating U.S. laws related to money laundering and terror financing, agreeing to pay fines totaling $4.3 billion on November 21.

SEC’s Legal Battle and Binance’s Compliance Struggles

The recently unsealed court records are part of a new filing by the U.S. SEC, incorporating the DOJ’s enforcement actions and settlements to bolster its case against Binance and Zhao. The SEC initially pressed 13 charges against Binance on June 5, alleging unregistered offers and sales of BNB and Binance USD (BUSD) tokens, as well as infractions related to the Simple Earn and BNB Vault products and its staking program.

Additionally, the SEC contends that Binance failed to register its Binance.com platform as an exchange or broker-dealer clearing agency.

In its latest filing, the SEC seeks the court’s acknowledgment of the facts presented in Binance’s settlement through a “judicial notice,” essentially asking the judge to declare presented evidence as true without a formal presentation of evidence, according to Stark. This settlement serves as a crucial element in the SEC’s strategy to challenge Binance’s motion to dismiss the case, undermining the exchange’s arguments regarding its historical presence and operations in the U.S.

Binance’s settlement with the DOJ indicated that by March 2018, the exchange had more than three million U.S. customers, and approximately 30% of its web traffic originated from the United States as of June 2019.

The unfolding legal developments highlight the increasing regulatory scrutiny faced by major players in the cryptocurrency space, emphasizing the need for compliance with existing financial regulations. As the SEC strengthens its case against Binance and its executives, the repercussions of this legal battle may shape the regulatory landscape for the broader cryptocurrency industry in the United States and potentially influence global regulatory approaches to the rapidly evolving crypto market.