TL;DR:
- Binance is looking to address its compliance gaps and work with regulators to resolve ongoing investigations.
- The exchange has a long history of US regulatory troubles, including investigations by the DOJ, IRS, CFTC, and SEC.
- The CEO of Binance and the exchange itself may face criminal charges, including insider trading, according to a report by the DOJ.
Just throw money at it
Binance expects to pay fines to settle US investigations
Binance, the world’s largest cryptocurrency exchange, has been under regulatory scrutiny by the US authorities for a long time. Patrick Hillmann, Binance’s Chief Strategy Officer, has acknowledged that some of the software engineers who helped the exchange to grow were unfamiliar with the laws surrounding bribery, corruption, and money laundering. Hillman stated in a recent interview that the firm is working with regulators to discover the remediations it must undergo to fill the compliance gaps. The negotiations are expected to lead to fines, but the value of the price is yet to be determined.
This has led to gaps in Binance’s compliance efforts, which the company is now trying to fill by “working with regulators to figure out what are the remediations we have to go through.” Hillmann has revealed that the company is highly confident and feels good about the ongoing discussions, but the discussions are still ongoing, and the company does not know what the regulators’ decision will be.
History of issues
Binance has a long history of US regulatory troubles. In 2018, the New York Attorney General’s office referred Binance to the New York State Department of Financial Services for a potential violation of New York’s virtual currency regulations. In March 2021, the Commodity Futures Trading Commission (CFTC) opened a probe into whether the exchange illegally allowed US residents to use the service. The CFTC also launched a separate investigation into Binance over claims of insider trading in September 2021, predated by another investigation by the Department of Justice (DOJ) and the Internal Revenue Service.
The CEO of Binance, Changpeng Zhao and the exchange itself may face criminal charges, including insider trading, according to a report by the Department of Justice. In addition, the US Securities and Exchange Commission (SEC) is reportedly preparing to file a lawsuit against Paxos Trust. The regulator plans to sue Paxos Trust for violating investor protection laws.
Binance’s Binance USD (BUSD) stablecoin issuer, Paxos Trust, has been ordered by the NYDFS to stop minting BUSD and to end its relationship with Binance, following reports that the U.S. Securities and Exchange Commission is preparing to sue Paxos Trust for violating investor protection laws. The SEC’s action comes after Paxos’ failure to comply with subpoenas issued by the agency in 2022.
The existence of BUSD is not affected by Paxos’ inability to mint it, but it could have a negative impact on the token’s trading volume, which might decrease significantly in the future. In response to Paxos’ announcement, Binance CEO CZ tweeted that the company would explore other stablecoin options, signaling that BUSD might be replaced soon.
Binance is now seeking to address its compliance gaps and work with regulators to resolve the ongoing investigations. Although Binance’s Chief Strategy Officer acknowledged that the remediations required might result in fines, he is “highly confident and feeling really good about where those discussions are going.” Despite this, it is still hard to estimate the size of the fines or when the exchange might reach a possible resolution.
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