US Authorities Demand Information From Hedge Funds About Crypto Exchange Binance

The Washington Post has reported that federal prosecutors in the U.S. are investigating potential money-laundering violations by cryptocurrency exchange Binance, and have issued subpoenas to American hedge funds for records of their communications with the company. 

The subpoenas, issued by the U.S. attorney’s office for the Western District of Washington in Seattle, do not necessarily indicate that charges will be brought, and prosecutors are reportedly still considering a possible settlement with Binance and whether they have sufficient evidence to bring indictments against the company.

In an interview, Binance’s Chief Strategy Officer, Patrick Hillmann, stated that the company is in communication with “virtually every regulator across the globe on a daily basis,” but declined to comment on the status of any U.S. investigation. The federal probe into Binance is taking place amid a time of uncertainty in the cryptocurrency industry.

The collapse of FTX, a popular trading platform accused by authorities of being a fraudulent scheme, has increased concerns about the largely unregulated online marketplaces where digital assets are traded. The failure of crypto companies, such as Celsius in July, has become more common and interconnected with the bankruptcy of Alameda Research, an FTX affiliate, five months later.

Binance’s founder and CEO, Changpeng Zhao, was an early backer of FTX, and the sale of a large portion of the company’s digital tokens by Zhao reportedly contributed to a customer panic and run on bank deposits that FTX was unable to fulfill.

Binance is closely monitored

As attention shifts to Binance, the largest cryptocurrency exchange in the world, its CEO, Changpeng Zhao, has spoken out against FTX and called for stricter oversight in the industry. Binance has frequently faced criticism from financial regulators and law enforcement agencies for its past practice of allowing users to buy and sell cryptocurrency on its platform without requiring identification, which made it a popular choice for money launderers.

This lack of responsibility on the part of Binance was noted by former Justice Department prosecutor John Ghose, who specialized in cryptocurrency cases before leaving to enter the private sector in 2021.

Binance’s Chief Strategy Officer, Patrick Hillmann, admitted that the company had neglected regulatory compliance during its initial period of rapid expansion. However, Hillmann stated that in recent years, Binance has made significant investments in compliance programs, cooperated closely with law enforcement, and developed new technology to catch criminals on its platform.

Hillmann claimed that the company has “completely changed its posture” and is now one of the most proactive parties in identifying, freezing, and recovering funds laundered by criminals. He also argued that overall incidents of criminal activity in the cryptocurrency industry are decreasing.