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This week, Australian authorities took proactive measures by directly approaching both current and former employees of Binance's Australian branch. They requested access to internal communications and data stored on their personal devices. This move comes as part of the government's ongoing actions against the prominent cryptocurrency exchange, which has been facing a mounting array of legal challenges.
In a coordinated effort, the Australian Securities and Investments Commission (ASIC) reached out to the representatives of Binance individually outside of the company's premises this week, as disclosed by the source. This development signifies another jurisdiction where regulatory authorities are tightening their grip on the company.
Binance is currently grappling with legal challenges on a global scale, ranging from serious allegations by U.S. regulators to a raid conducted by French authorities, a denial of licensing by the Dutch, and now a probe initiated in Australia. These legal headwinds pose significant obstacles for the company, even as its CEO dismisses concerns regarding the departure of several key legal and compliance executives.
The exchange had been running for several years without significant regulatory intervention; however, the recent emergence of certain cases has caught the company off guard. Following the U.S. Securities and Exchange Commission's extensive charges against Binance and CEO Changpeng "CZ" Zhao, the company has experienced substantial customer withdrawals and witnessed a 17% decline in the value of its native BNB token within the last month. Earlier this year, the U.S. Commodity Futures Trading Commission also leveled similar accusations against Binance, accusing the company of purposefully evading government oversight.
"If the allegations against Binance are true, they implicate very serious criminal and civil misconduct, including national-security related issues,” said Alex Zerden, a former U.S. Treasury Department official who is founder and CEO of advisory firm Capitol Peak Strategies. “And given the exchange's global footprint, the investigation into Binance and these allegations would likely span multiple jurisdictions and require sustained cooperation among multiple jurisdictions."
According to a spokesperson for Binance Australia, the recent investigation by ASIC focuses on the company's previous derivatives operations. The spokesperson clarified that the investigators did not visit their offices. Although Binance Australia continues to operate a spot-trading exchange in the country, it ceased offering futures products earlier this year.
ASIC confirmed an “ongoing” investigation with Binance, but a spokesperson said the regulator is "unable to confirm or deny any operational detail such as possible searches."
Last month, Binance was subject to a raid by the public prosecutor in Paris due to suspicions of "aggravated money laundering" and the provision of "illegal" services. The ongoing investigation is linked to allegations that Binance operated as a digital asset service provider without obtaining regulatory approval until May 2022. Additionally, there are accusations of Binance's involvement in "aggravated money laundering by taking part in investment operations, concealment and conversion.”
Last month, the largest cryptocurrency exchange in the world pulled out of the Netherlands after failing to obtain a virtual asset service provider (VASP) license from the Dutch financial regulator. This license is crucial as it demonstrates a company's ability to meet the local anti-money laundering (AML) requirements effectively.
In recent days, there have been reports indicating the departure of several crucial executives from Binance, including the general counsel, chief strategy officer, senior vice president for compliance, and chief business officer. CZ, the CEO of Binance, addressed these developments on Friday through a tweet, emphasizing that turnover is a common occurrence in any company. He downplayed media speculations that the departures were linked to his handling of the U.S. Department of Justice (DOJ) investigation of Binance.
The surge of opposition, legal actions, and inquiries across countries where Binance operates implies a potential collaboration among regulators and prosecutors in sharing information and discussing their respective cases.
“Cross-border information sharing is generally cumbersome,” said Zerden, who is also an adjunct senior fellow at the Center for a New American Security. Working across borders “can be incredibly frustrating for law enforcement and regulatory officials,” but when friendly jurisdictions have similar concerns, the work can move much more quickly.
“Binance remains committed to cooperating with requests from regulators,” the spokesman said this week.
In addition to the specific issues surrounding Binance, its lack of a physical headquarters could potentially exacerbate its troubles, a situation that governments might become increasingly impatient with.
“The operating environment is going to be more difficult for entities that want to operate in an undefined regulatory location,” said Yaya Fanusie, director of policy for AML and cyber risk at the Crypto Council for Innovation. “There's growing impatience among both regulators and compliant actors with firms that try to play regulatory arbitrage.”
The current lack of criminal charges against Binance officials does not necessarily imply that these individuals have not already been indicted, possibly by a U.S. grand jury. Certain allegations made by U.S. securities and derivatives agencies indicate intentional breaches of the law. However, if there are sealed charges, they would likely remain undisclosed until the executives are in the jurisdiction of U.S. law enforcement and arrests are carried out.
A notable instance occurred when Anatoly Legkodymov, the founder of Hong Kong-based platform Bitzlato Ltd., was apprehended in Florida. This arrest of the Russian citizen was a collaborative effort between the U.S. Department of Justice (DOJ) and French authorities. In a money-laundering investigation, a division of the U.S. Treasury identified Binance as one of the main counterparties of Bitzlato.
Despite facing legal challenges, Binance remains operational worldwide, although the allegations have caused considerable harm. Binance's U.S. division, Binance.US, took measures to mitigate the impact of the SEC case by downsizing its workforce and suspending dollar deposits. It transformed into an exclusively cryptocurrency exchange due to the loss of banking services, as stated in court filings. Recently, Binance faced another setback when its European banking partner, Paysafe Payment Solutions, announced its decision to discontinue support for the crypto exchange after September 25. Consequently, Binance now needs to find an alternative solution to handle euro deposits and withdrawals.
In addition to Coinbase, Binance has also entered the legal arena to challenge the SEC in U.S. federal courts, where numerous unresolved legal issues within the crypto industry await resolution.
"Guidance from experienced and competent legal counsel is essential," said Joshua Klayman, who leads the digital-assets arm of the law firm Linklaters in the U.S. "For companies in the digital asset space, in my view, this means a legal team that understands the relevant business and technology, as well as deep knowledge of the legal and regulatory landscape that has been unfolding over the past several years."
The SEC has taken measures to regulate Binance's cash transactions, expressing worries that the exchange might misappropriate the funds belonging to U.S. customers. In response to this ongoing battle, Binance has recently recruited M. Kendall Day, a former acting deputy assistant attorney general at the DOJ, bolstering its legal team that already consists of distinguished ex-DOJ and SEC officials.
