US prosecutors claim Binance processed around $275 million in both deposits and withdrawals to BestMixer, a cryptocurrency “mixing” service designed to make cryptocurrency transactions harder to trace before Dutch law enforcement shut down that service in May of 2019 as part of a money laundering investigation. The charging document goes on to allege that Binance users included ransomware gangs, hackers who had plundered crypto from other exchanges, and scammers.
For years after its founding in 2017, the prosecutors say, Binance had virtually no know-your-customer requirements, in violation of US money laundering laws, despite offering its services to US users. In the indictment against Zhao, he’s accused of encouraging the company to operate in a “grey zone,” telling employees that it was “better to ask forgiveness than permission.”
Even once Binance appeared to enact more stringent know-your-customer rules for users in 2021, the indictment alleges, the company often ignored sanctions violations or knowingly allowed users to circumvent its money laundering checks. More than 12,500 users, the indictment claims, listed Iranian phone numbers on their accounts but were allowed to continue trading on the exchange.
“Iran is very tricky,” a Binance staffer wrote in an internal communication at one point, according to the indictment. “We definitely do not want to acknowledge we have them onboard … our official stance is we gotten rid of all of them [sanctions] and blocked.”
Binance’s investigations and compliance team, according to the charging document, was instructed to check on a user’s “VIP level” before banning their account for violations—or to even give VIP users new accounts despite known violations. In one internal conversation, a Binance staffer allegedly told another to warn a VIP user to “be careful with his flow of funds, especially from darknet markets like hydra,” according to the indictment. Prosecutors add that the user “can come back with a new account [but] this current one has to go, it’s tainted.”
Rumors and reports of Binance’s use by criminals have circulated for years. Reuters reported in June of 2022 that Binance had enabled more than $2.35 billion in money laundering by hackers and drug traffickers, which Binance denied. In December of last year Reuters wrote that the Department of Justice was considering criminal charges against the company.
The charges and settlement come on the heels of the fraud conviction of Sam Bankman-Fried, the former CEO of FTX, which once rivaled Binance as one of the biggest cryptocurrency exchanges in the world. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases,” Garland said in Tuesday’s press conference. “The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”