There Is A Plan To Avoid US Scrutiny In Binance Executives' Texts And Documents

Binance, the world's largest cryptocurrency exchange, devised a plan to avoid prosecution by American authorities after starting an American entity in 2019.

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This is the first time regulators have suggested that a crackdown on offshore crypto players is on the way, according to Trade Algo, citing a Binance executive's warning in a private chat with colleagues, that a lawsuit would be like "nuclear fallout" for the company and its officers.

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In order to prepare this report, Trade Algo reviewed messages, documents, and interviews with former employees from 2018 to 2020 in order to determine what is happening.

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There is more intertwining between Binance, founded in 2017, and Binance.US than the companies have revealed, with staff and finances mixed together, and a company affiliated with Binance buying and selling cryptocurrencies moving among them, according to the report.

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Despite the fact that Binance.com operates primarily from hubs based in China and Japan, the company notes that over a fifth of its customers are US citizens. The headquarters of Binance.US is located in San Francisco, California.

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There is speculation that Binance developers in China could have access to U.S. customer data as they maintain the software code for Binance.US users' digital wallets, according to Trade Algo.

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There has been an investigation, along with subpoenas, into the relationship between Binance and Binance.US by the Securities and Exchange Commission and the Department of Justice since 2020, the report said, citing subpoenas and people familiar with the matter. U.S. regulators could claim that Binance has control over its U.S. entity if they determine that Binance has control over it, which would allow them to police Binance's entire business from the U.S.

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A Binance spokesperson told Trade Algo that the company has already acknowledged that it did not have adequate compliance and controls in place during those early years...the company today is significantly different from that in those early years in terms of compliance."

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There was no immediate response to Trade Algo's request for comment from Binance.US, the SEC, and the Department of Justice.

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During this week's hearings, three U.S. senators have called for further information about Binance's regulatory compliance and finances, as well as Binance.US, which is the company's US-based subsidiary.

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A de facto subsidiary of Binance.com was established in 2019 in order to divert the attention of U.S. regulators from Binance.com in the future.