Binance Holdings Ltd. is under investigation by the Justice Department and Internal Revenue Service, ensnaring the world’s biggest cryptocurrency exchange in U.S. efforts to root out an illicit activity that’s thrived in the red-hot but mostly unregulated market.
As part of the inquiry, officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business, according to people with knowledge of the matter who asked not to be named because the probe is confidential. Led by Changpeng Zhao, a charismatic tech executive who relishes promoting tokens on Twitter and in media interviews, Binance has leap-frogged rivals since he co-founded it in 2017.
Like the industry it operates in, the firm has succeeded largely outside the scope of government oversight. Binance is incorporated in the Cayman Islands and has an office in Singapore but says it lacks a single corporate headquarters. Chainalysis Inc., a blockchain forensics firm whose clients include U.S. federal agencies, concluded last year that among transactions that it examined, more funds tied to criminal activity flowed through Binance than any other crypto exchange.
“We take our legal obligations very seriously and engage with regulators and law enforcement collaboratively,” Binance spokeswoman Jessica Jung said in an emailed statement while adding that the company doesn’t comment on specific matters or inquiries. “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.” Spokespeople for the Justice Department and IRS declined to comment.
U.S. officials have expressed concerns that cryptocurrencies are being used to conceal illegal transactions, including theft and drug deals, and that Americans who’ve made windfalls betting on the market’s meteoric rise are evading taxes.
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