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DOJ hesitates to bring charges against Binance amid the depths of crypto winter

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(Kitco News) -  Following a year that witnessed two major contagion events roil the cryptocurrency market, reports have emerged that prosecutors with the U.S. Department of Justice are delaying the conclusion of a long-running criminal investigation into Binance, the world’s largest and most active cryptocurrency exchange.

According to a report from Reuters, the investigation originally began in 2018 with a focus on Binance’s compliance with U.S. anti-money laundering laws and sanctions. The case centers around investigating charges related to unlicensed money transmission, money laundering conspiracy and criminal sanctions violations.

The case is now to the point where many of the federal prosecutors involved believe there is enough evidence to justify an aggressive move against the exchange and its executives – including its founder Changpeng Zhao (CZ).

This includes prosecutors working in the office of the Money Laundering and Asset Recovery Section (MLARS), the U.S. Attorney’s Office for the Western District of Washington in Seattle and the National Cryptocurrency Enforcement Team.

In order for money laundering charges against a financial institution to proceed, they must first be approved by the MLARS chief, the report said. Leaders from the other two offices, as well as additional higher-level DOJ officials, would also need to sign off on any action against Binance.

In recent months, the defense attorneys for Binance have met with Justice Department officials to argue against moving forward with criminal proceedings at this point, citing the dangers such a move would pose to the cryptocurrency market.

“Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn,” the report said. “The discussions included potential plea deals, according to three of the sources.”

Currently, no final charging decisions have been made. There are three possible outcomes moving forward, according to Reuters: The DOJ could bring indictments against Binance and its executives, negotiate a settlement, or close the case without taking any actions at all.

The multi-year case has reportedly had a great effect on how CZ has run operations at Binance and led to the hiring of officials from the Internal Revenue Service’s Criminal Investigation division, which was the agency that was investigating Binance. He also enforced strict secrecy rules for employees, such as using email as minimally as possible and using encrypted messaging services for communication.

Binance users' Bitcoin accounts are 101% collateralized with BTC: Mazars

An investigation by Reuters found that the exchange “kept weak anti-money laundering controls, processed over $10 billion in payments for criminals and companies seeking to evade U.S. sanctions, and plotted to evade regulators in the United States and elsewhere.” Binance has disputed these findings, calling the illicit-fund calculations inaccurate and the descriptions of its compliance controls “outdated.”

The November collapse of the cryptocurrency exchange FTX has led to the DOJ opening an investigation into the exchange’s handling of company funds, but it is “unclear whether this new probe will add impetus to the investigation into Binance or slow it down.”

The main issue for Binance centers is around the U.S. Bank Secrecy Act, which requires crypto exchanges to register with the Treasury Department and comply with anti-money laundering requirements if they conduct “substantial” business in the United States. Binance has never complied with this Act “despite almost a third of its users being U.S.-based the year of its launch, according to a company blog post,” the report from Reuters said.

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