Crypto Crime Cartel: Bye Bye Binance?

Following the massive indictments against BitMEX and its co-founders including Arthur Hayes for facilitating money laundering on their platform, CoinGeek published an article exposing a cartel of crime among exchanges and other digital asset institutions. Consequently, cryptocurrency exchange Binance and Changpeng Zhao also known as CZ is a natural next step—both for our Crypto Crime Cartel coverage and for law enforcement.

We will continue to expose the criminal element within the digital asset community which is standing in the way of mass adoption and attempting to drag us into a regulatory dark age where not only are terrorists, paedophiles and drug dealers free to conduct their business within the ecosystem with impunity, but also where law enforcement is powerless to stop them.

Binance has much in common with BitMEX

To start with, there’s very little in the BitMEX indictments that couldn’t be said against Binance.

The charges against BitMEX’s founders were brought under the Bank Secrecy Act, which is intended to prevent money laundering and ensure that banks and financial institutions take steps to ensure they are not being used to facilitate it. The BitMEX founders are staring down the barrel of a federal prison sentence because they chose not to take any action at all to prevent the money laundering taking place on its platform, so how worried should Binance be?

You can test Binance’s attitude toward money laundering yourself right now by opening an account and seeing how many barriers stand between you and being able to deposit, trade and withdraw on their platform. If you don’t want to do that, we can tell you now: there aren’t any.

Dr. Craig Wright tested this for himself earlier this year. He was able to set up multiple accounts using nothing but a name, a date of birth, and an email address and make a joke of the platform’s 2 BTC withdrawal limit for non-verified users.

No surprise, then, that a report published by Chainalysis in January 2020 tracked the movement of $2.8 billion worth of criminal BTC in 2019 to see where it ended up, and found that a staggering 27.5% of that $2.8 billion ended up with Binance—making them the single biggest recipient of illegal BTC in 2019.

Of course, this only represents one piece of the overall activity on Binance’s platform, but that is the point on money laundering. The U.S. courts, in trying RICO prosecutions, also recognize that when looking at racketeering activity by an organisation—such as facilitating money laundering—it is to be expected that the illegal activity can be punctuated by extended periods of legitimate business.

Binance’s smokescreen reveals intentional criminality

A big part of the BitMEX indictments is spent slamming the founders for intentionally setting up their company in the Seychelles in a poor attempt to escape the reach of U.S. authorities. The indictments make it clear that U.S. prosecutors view this as evidence of wilful evasion of the U.S.’ anti-money laundering enforcement.

Binance has a history of repeatedly moving shop in order to stay ahead of broadening regulatory regimes: they were originally established in China before moving to Japan in anticipation of China’s crackdown on digital asset exchanges, and have become increasingly secretive since then.

Changpeng Zhao has in the past bragged that Binance doesn’t have an office ‘because Bitcoin doesn’t have an office’ and won’t admit where he himself works from. That is an interesting but unsurprising position for the head of a money washing machine to take—but we now know the view the U.S. government is likely to take of such a charade. Organizations also have to pay tax somewhere, Changpeng—so if we are to take you at your word, shall we add tax evasion to the charge sheet?

Whatever protection CZ thinks he’s getting by being coy, he’s in for a rude awakening when the U.S. government (or any government, for that matter) moves onto the next target in its battle against the widespread crime being facilitated or actively organised by these outfits. Not only will law enforcement be undeterred by Binance’s geographical game of cat-and-mouse, but they will see it as intentional evasion of their anti-money laundering obligations, as was the case for BitMEX.

In fact, this practice has not gone unnoticed internationally. The Financial Action Task Force (FATF), an intergovernmental organisation aimed at tackling global money laundering and terrorist financing, published a report on the money laundering risk in the digital asset industry. It provided a number of case studies, one of which was used to illustrate the practice of companies jumping between jurisdictions to stay ahead of local regulations. Though anonymized, the…

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