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Transcripts, Documents Expose Crypto Exchange Scheme to Avoid US Regulatory Scrutiny: Report


The Wall Street Journal reported on Sunday that Binance, one of the largest cryptocurrency exchanges in the world, devised a plan to avoid the threat of prosecution from US authorities when it launched a US entity in 2019.

Any lawsuit from US regulators, who signaled an upcoming crackdown against overseas unregulated digital currency operators, would be a “nuclear fallout” for Binance’s business and its officers, the Wall Street Journal said, citing a Binance executive warning colleagues in a private conversation in 2019.

The report is based on letters and documents from 2018 to 2020 reviewed by the Wall Street Journal, as well as interviews with former employees.

The report said that Binance, which was founded in 2017, and Binance.US are more intertwined than the companies have disclosed, combining personnel and financial resources, and sharing an affiliated entity that buys and sells cryptocurrencies.

She noted that primarily operates from hubs in China and Japan, yet one-fifth of its customers are located in the United States. Binance.US is headquartered in San Francisco.

Binance developers in China kept the software code that powers Binance. The WSJ reported that the digital wallets are for US users, which could give Binance access to US customer data.

Since 2020, the Department of Justice and the Securities and Exchange Commission have been investigating Binance’s relationship with Binance.US, the report said, citing subpoenas and people familiar with the matter. If US regulators determine that Binance controls its US entity, they can claim authority to monitor Binance’s entire business.

In a statement emailed to Reuters, a Binance spokesperson said: “We have already acknowledged that we did not have sufficient compliance and controls in place during those early years… We are a very different company today when it comes to compliance.”

Binance.US, the SEC and DOJ did not immediately respond to Reuters requests for comment.

Binance is under intense scrutiny as three US senators this week asked cryptocurrency exchange giant and Binance.US for information about their regulatory compliance and finances.

Reuters reports that Binance.US was created as a de facto subsidiary in 2019 to pull the scrutiny of US regulators away from

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Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.