Binance, one of the largest cryptocurrency exchanges globally, concocted a plan to prevent the threat of prosecution by U.S. authorities when it began an American entity in 2019, as reported by the Wall Street Journal on Sunday.
Any lawsuit from US regulators, hinting at a crackdown on unrestricted offshore crypto players, would be “nuclear fallout” for Binance’s business and officers, according to the WSJ, quoting a Binance executive’s caution to colleagues in a private chat in 2019.
According to The Wall Street Journal, the messages and documents from 2018 to 2020 and also interviews with former employees form the basis of this report.
As per the report, Binance, established in 2017, and Binance.US are more closely linked than the companies have revealed, combining staff and finances and sharing an affiliated entity that buys and sells cryptocurrencies.
It also noted that a fifth of its customers were located in the United States but it operated mainly from hubs in China and Japan. Binance.US works from San Francisco.
The WSJ described that the Binance developers in China have kept the software code that backed Binance.US users’ digital wallet, possibly providing access to U.S. customer data via Binance
The Department of Justice and Securities and Exchange Commission have been studying Binance’s relationship with Binance.US since 2020, the report stated, referencing subpoenas and people familiar with the matter. If US regulators ascertain that Binance has authority over its US entity, they may claim authority over Binance’s entire business.
In an emailed statement to Reuters, a Binance spokesperson said, “We have already acknowledged that we did not have adequate compliance and controls in place during those early years…we are a very different company today when it comes to compliance,” a Binance spokesperson stated in an emailed statement to Reuters
Binance.US, the SEC and the DOJ did not respond instantly to Reuters’ inquiries about the matter.
Binance is under increased pressure since three U.S. senators this week demanded information about their regulatory compliance and finance the giant cryptocurrency exchange and Binance.US.
Reuters has reported that Binance.US was founded as a de facto subsidiary in 2019 to divert the attention of U.S. regulators away from Binance.com.
