Exclusive: U.S. Justice Dept is split over charging Binance as crypto world

WASHINGTON, Dec 12 (Reuters) – Splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation into the world’s largest cryptocurrency exchange Binance, four people familiar with the matter have told Reuters.

The investigation began in 2018 and is focused on Binance’s compliance with U.S. anti-money laundering laws and sanctions, these people said. Some of the at least half dozen federal prosecutors involved in the case believe the evidence already gathered justifies moving aggressively against the exchange and filing criminal charges against individual executives including founder Changpeng Zhao, said two of the sources. Others have argued taking time to review more evidence, the sources said.

The inquiry involves prosecutors at three Justice Department offices: the Money Laundering and Asset Recovery Section, known as MLARS, the U.S. Attorney’s Office for the Western District of Washington in Seattle and the National Cryptocurrency Enforcement Team. Justice Department regulations say that money laundering charges against a financial institution must be approved by the MLARS chief. Leaders from the other two offices, along with higher-level DOJ officials, would likely also have to sign off on any action against Binance, three of the sources said.

Through interviews with almost a dozen people familiar with the case, including current and former U.S. law enforcement officials and ex-Binance advisors, along with a review of company records, Reuters has pieced together the most comprehensive account so far of how the investigation developed and how Binance has sought to keep it at bay. Prosecutors’ deliberations on charging Binance have not been previously reported.

The stakes are high for the deeply troubled crypto sector. If the investigation goes against Binance and Zhao, it could loosen Binance’s grip on the industry. Its hold has been strengthened by the recent collapse of rival exchange FTX.

Binance’s defense attorneys at U.S. law firm Gibson Dunn have held meetings in recent months with Justice Department officials, the four people said. Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn. The discussions included potential plea deals, according to three of the sources.

A Binance spokesperson said, “We don’t have any insight into the inner workings of the US Justice Department, nor would it be appropriate for us to comment if we did.” The Justice Department declined to comment.

The charges under investigation are unlicensed money transmission, money laundering conspiracy and criminal sanctions violations, the four people said. No final charging decisions have been made, though prosecutors consider Zhao and some other executives to be subjects of the investigation, one source familiar with the situation said. Ultimately, the Justice Department could bring indictments against Binance and its executives, negotiate a settlement, or close the case without taking any action at all.

Little has been revealed about the case. Reuters reported previously that in 2020, prosecutors requested extensive internal records from Binance about its anti-money laundering checks, along with communications involving Zhao and other executives.

The new reporting shows that the case has shadowed Binance for most of its five years in existence, shaping Zhao’s management of the company while he drove its explosive growth around the world. He instigated a recruitment spree last year that led to the hiring of officials from the Internal Revenue Service’s Criminal Investigation division, the U.S. government agency that was investigating Binance. He enforced strict secrecy rules on employees, telling them to use email as little as possible and to communicate using encrypted messaging services, according to company messages that Reuters has previously reported.

Reuters has investigated Binance’s financial crime compliance over the course of 2022. The reporting showed that Binance 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 the articles, calling the illicit-fund calculations inaccurate and the descriptions of its compliance controls “outdated.” The exchange has said it is “driving higher industry standards” and seeking to “further improve our ability to detect illegal crypto activity on our platform.”

Launched by Zhao in Shanghai in 2017, Binance now dominates the crypto industry….