Binance, one of the world’s largest cryptocurrency exchanges, is under investigation by United States Department of Justice and Internal Revenue Service, it has emerged.
According to Bloomberg on Thursday, the officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business.
The investigation comes after Germany’s financial regulator BaFin last month warned that Binance risked being fined for offering its securities-tracking digital tokens without publishing an investor prospectus.
News of the investigation has affected Binance Coin (BNB-USD) down by nearly 12 per cent for the session.
Although the government agencies haven’t accused the exchange of any wrongdoings yet, Binance spokesperson, Jessica Jung in an emailed statement stated; “We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion”.
She added that the company doesn’t comment on specific matters or inquiries, saying;
We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.
According to Financial Times, European regulators, including UK’s Financial Conduct Authority (FCA), sought to examine whether Binance complied with security rules before launching trading in stock tokens.
The underlying concern is that cryptocurrencies are being used to conceal illegal transactions, including theft and drug deals, and potential tax evasion from traders.
However, Changpeng Zhao, the CEO of Binance has said the company closely follows U.S. rules, by blocking Americans from its website, and uses advanced technology to analyze transactions for signs of money laundering and other illicit activity.
These concerns have been a hindrance to the industry being globally accepted, even as Wall Street is starting to embrace cryptocurrencies. For example, Colonial Pipeline Co. paid East European hackers $5 million ransom in untraceable cryptocurrency within hours of the cyber-attack on the company. The attack caused fuel shortages across the Eastern U.S.
This investigation is not the first time the trading platform has been scrutinized. In March, Bloomberg reported that the trading platform was facing an inquiry from Commodity Futures Trading Commission (CFTC) over whether the exchange allowed U.S. residents to trade on its platform.
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