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Binance Lapses Boosted Terrorists, Hackers, Sanctions Violators

Binance Holdings Ltd. had such lax controls over cryptocurrency transactions on its exchange that terrorists, hackers and sanctions violators used it for years to move billions of dollars, US prosecutors said.

By: BLOOMBERG
Updated on: Nov 23 2023, 14:12 IST
Binance was used by terrorists, hackers and sanctions violators to move billions of dollars. (REUTERS)
Binance was used by terrorists, hackers and sanctions violators to move billions of dollars. (REUTERS)

Binance Holdings Ltd. had such lax controls over cryptocurrency transactions on its exchange that terrorists, hackers and sanctions violators used it for years to move billions of dollars, US prosecutors said.

Binance and Chief Executive Officer Changpeng Zhao pleaded guilty to criminal charges Tuesday, admitting they failed to take basic anti-money laundering steps that are the bedrock of government efforts to check the flow of dirty money worldwide. Binance will pay $4.3 billion, while Zhao will step down as CEO and pay a $50 million fine. 

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The stunning turn of events means Zhao, the most powerful crypto figure in the world, faces prison time and will no longer run the industry’s largest exchange. It comes after a multiyear investigation by federal prosecutors and the fraud conviction earlier this month of Sam Bankman-Fried, the disgraced founder of the collapsed FTX exchange.

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Employees at Binance were engaged in a wide array of misconduct, and many were aware of the consequences of allowing millions of illegal transactions, according to the Justice Department and the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN. 

“Binance turned a blind eye to its legal obligations in the pursuit of profit,” Treasury Secretary Janet Yellen said in a statement. “Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.” 

Because of those failures, the US said, Binance allowed the following to take place:

  • The al-Qassam Brigades, the military wing of Hamas, used Bitcoin transactions to raise money for the Palestinian resistance. Hamas, which has been designated by the US as a terrorist organization, murdered more than 1,200 Israelis on Oct. 7. Binance failed to file suspicious activity reports with the US about Hamas fundraising, according to FinCEN.
  • Binance allowed Bitcoin transactions with other terrorist organizations, including al-Qaeda and ISIS, FinCEN said.
  • At least 1.1 million transactions valued at $899 million were conducted by people living in Iran, in violation of US sanctions, the company admitted.
  • Exchange users in Cuba and Syria, as well as the Ukrainian regions of Crimea, Donetsk and Luhansk, engaged in millions of dollars in transactions in violation of US sanctions, Binance admitted.
  • Binance users made $275 million in deposits from BestMixer, a crypto platform that helped obscure the digital money trail, the company said. Dutch authorities shut it down in 2019, saying it was “probably used to conceal and launder the criminal flows of money.”
  • Customers transferred $106 million in Bitcoin from Hydra Market, the Russian darknet marketplace, to Binance wallets between 2017 and 2022, the company admitted. US and German authorities seized Hydra’s servers in 2022, calling it the world’s largest and most prominent darknet market. It sold hacking software, fake IDs and illegal drugs such as heroin, cocaine and LSD.
  • Binance addresses handled tens of millions of dollars in transactions involving 24 strains of ransomware, with names like SamSam, Satan and WannaCry. While the company worked with law enforcement when notified, it deprived authorities of critical information about those attacks, FinCEN said. In 2021, the US indicted three North Korean military hackers over WannaCry attacks.
  • More than 1,000 transactions took place involving three marketplaces that dealt in child pornography and related material, FinCEN said. An administrator of one of those sites, Dark Scandals, was indicted in 2020. The site featured violent rape videos.

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First Published Date: 23 Nov, 13:41 IST

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