Binance accused of money laundering, BNB targeted by SEC investigation

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2022-06-07 22:17:40

Cryptocurrency exchange Binance continuously encountered waves on June 6 and June 7 in the face of legal allegations from US authorities.

Binance accused of money laundering by Reuters

Reuters alleges that the lax KYC process on Binance made it easy for hackers to launder money through cryptocurrencies

On the evening of June 6, Reuters published a special investigative article about the world’s largest cryptocurrency exchange Binance. The news agency alleged that the lax KYC process on Binance helped Lazarus Group trade dirty money.

Reuters has presented evidence of a notorious hacker group that stole more than $5.4 million from Eterbase, Slovakia in September 2020. The hacker group then used at least 20 fake accounts on the Binance exchange to launder the money.

Lazarus is believed to be the culprit behind many major hacks, including the attack on the Ronin network of the game Axie Infinity in March 2022. This is considered the most serious attack in the history of the crypto industry, with an estimated damage of up to 622 million USD. Binance exchange then poured $150 million into Sky Mavis with the goal of repaying the money lost in the hack.

Reuters claims that for five consecutive years (from 2017 to 2021), Binance processed more than $2.35 billion in transactions related to money laundering, fraud, and illicit drug sales through “darknets”.

Statistics of coins laundered via Binance from 2017 to 2021
Statistics of coins laundered via Binance from 2017 to 2021 in Reuters report

Hydra is a well-known “black market” that uses cryptocurrencies to buy and sell drugs. Since the beginning of 2018, Hydra is said to have processed more than 780 million USD on Binance exchange. Until August 2021, when Binance imposed mandatory KYC on all users, the traffic between Binance and Hydra dropped drastically.

An increase in the amount of dirty money laundered on Binance from the time the exchange expanded to Russia to the time when KYC was imposed on all users
An increase in the amount of dirty money laundered on Binance from the time the exchange expanded to Russia to the time when KYC was imposed on all users

The Reuters report also revealed Binance’s “shady” ties to organized crime groups in Europe. They attacked retirees in Germany, Austria and Spain, took $800 million and dispersed it through Binance.

Binance has defended itself against adverse information from the Reuters report. The exchange asserts that it does not abet criminals to launder money. Binance said it is actively applying the most stringent measures to prevent dirty money transactions and regularly cooperates with global authorities to investigate crimes.

Explain how groups like Lazarus use their platform. The company said it worked with online analytics firm Chainalysis to freeze the funds, and its team members provided information that:

Leads to the identification of the group (Lazarus) and tracing the source of funds from the theft of $250 million from an exchange. We actively work with many Law Enforcement agencies to target North Korean operations by sharing intelligence, proactively freezing their accounts and shutting down their networks before they can. Successful escape with stolen money.

Binance also emphasized the transparency of the Blockchain, arguing that money laundering through crypto will leave a clearer trail than cash. At the same time, the exchange also believes that Reuters is deliberately ignoring efforts to cooperate with authorities, as well as the exchange’s move to increase KYC/AML and paint a one-sided picture.

In order to prove its innocence, Binance has posted more than 50 pages of emails about the conversation between its Communications Director – Patrick Hillmann and Reuters reporters for the community to self-assess.

Binance has published more than 50 pages of emails about the conversation between its Chief Communications Officer, Patrick Hillmann, and Reuters reporters.
Binance publishes more than 50 pages of emails about a conversation between its Communications Director – Patrick Hillmann and Reuters reporters

BNB is accused of being a “security”

BNB is accused by the SEC of being a “security”
BNB is accused by the SEC of being a “security”

With the June 6 money laundering allegations unresolved, Binance faced an investigation by the US Securities and Exchange Commission (SEC) on June 7. US regulators are investigating whether the exchange’s 2017 BNB token sale was considered a “security” offering.

According to the SEC review, Binance Holdings Ltd. may have broken securities rules when it released its BNB tokens 5 years ago. BNB can be classified as a security, so Binance’s activities can be considered illegal by not registering with the agency.

Upon its founding in July 2017, Binance held an ICO for BNB (also known as Binance Coin). The proceeds of 15 million USD were then used to build the exchange, only half a year later, Binance has become the largest cryptocurrency trading platform in the world and since then the exchange has maintained its position. its lead.

In early 2022, Binance Coin was renamed to “Build and Build”, keeping the code BNB. The exchange said the name change is to confirm that BNB is no longer a Binance token but has become a community coin.

BNB is currently the 5th largest cryptocurrency in the world with a market capitalization of over 46 billion USD.

The SEC also noted the relationship between Binance and Binance.US. The SEC has expressed interest in the ownership stake of Changpeng Zhao, founder and CEO of Binance, to market makers on Binance.US and whether the exchange will conduct brokerage activities. – agent or not.

Binance also emphasized that Binance.com and Binance.US are two separate entities. Binance.US is a separate US-focused trading platform that serves users in the country by providing products and services that comply with federal and state regulations.

In a separate statement, Binance.US said it was “committed to maintaining the highest standards of compliance”.

Currently, Binance is also under investigation by the US Department of Justice, the Asset Futures Trading Commission (CFTC) and the Internal Revenue Service (IRS).

The BNB token price is dropping by more than 7% in just 24 hours because of the aforementioned negative news.

15m chart of BNB/USDT pair on Binance exchange at 09:00 AM on 06/07/2022
15m chart of BNB/USDT pair on Binance exchange at 09:00 AM on 06/07/2022

Binance temporarily declined to comment on the SEC allegations and said:

This is not the right time to comment on our conversations with regulators, including education, support, and voluntary responses to requests for information. We will continue to respond to all requests set forth by regulatory authorities.

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