June 08, 2023

Warren, Van Hollen Request DOJ Investigation of Crypto Exchange Binance’s Potentially False Statements to Congress

New SEC Complaint Against Binance Indicates Company’s Responses to Senators’ Questions About Business Practices Aren’t True

Text of Letter (PDF) | Binance Responses to Senators’ Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-Md.), both members of the Senate Banking Committee, sent a letter to Attorney General Merrick Garland asking the Department of Justice (DOJ) to investigate the crypto exchanges Binance and Binance.US for potentially making a series of false statements to Congress. The senators’ request to the DOJ comes as the Securities and Exchange Commission (SEC) filed a complaint against Binance for “blatant disregard of the federal securities laws and the investor and market protections these laws provide.” The allegations in the SEC’s filing indicate that Binance and Binance.US responses to the senators’ March 2023 letters about their business practices are not true – a possible violation of federal law. 

“In short, Binance and Binance.US made two representations to Congress: that Binance and Binance.US were ‘separate entities,' and that Binance.US ‘prioritized regulatory compliance’ and had ‘best-in-class compliance function.’ If the allegations in the SEC filing are accurate, then it would appear that neither of these claims are true,” wrote the senators. 

On March 1, 2023, Senators Warren, Van Hollen, and Roger Marshall (R-Kan.) wrote to the CEOs of Binance and Binance.US asking about the companies’ structure, operations, and practices to ensure compliance with anti-money laundering, countering financing of terrorism, and know-your-customer laws, including questions about the relationship between Binance and Binance.US and the companies’ compliance policies. The senators are releasing Binance’s response to their questions and because Binance.US claimed its response was confidential, will share these responses with the DOJ on a confidential basis. 

The senators note that both Binance and Binance.US claimed that they were separate entities – however, the SEC’s filing said, “(Binance CEO Changpeng) Zhao and Binance created BAM Management and BAM Trading in the United States and claimed publicly that these entities independently controlled the operation of the Binance.US Platform. Behind the scenes, however, Zhao and Binance were intimately involved in directing BAM Trading’s U.S. business operations and providing and maintaining the crypto asset services of the Binance.US Platform.” 

Binance claimed that it has “prioritized regulatory compliance” and Binance.US also claimed that “(P)rotecting our customers and providing the best possible experience has been

BAM Trading’s primary goal. These efforts are grounded in a best-in-class compliance function.” However, the SEC’s filing said, “When the Binance.US Platform launched in 2019, Binance announced that it was implementing controls to block U.S. customers from the Binance.com Platform. In reality, Binance did the opposite. Zhao directed Binance to assist certain high-value U.S. customers in circumventing those controls and to do so surreptitiously because—as Zhao himself acknowledged—Binance did not want to ‘be held accountable’ for these actions.”

“This is a serious matter. In this case, a bipartisan group of senators was seeking information on the cryptocurrency industry in order to inform an ongoing legislative process and determine whether new laws are needed to address the risks from cryptocurrencies and cryptocurrency exchanges – and it appears that Binance and Binance.US undermined this important investigation and the legislative process by providing false and misleading information to Congress. These actions by Binance and Binance.US represent a potential violation of federal law that may subject company officials to fines and imprisonment, and the Department should, in conjunction with the ongoing SEC complaint, conduct a rapid and thorough investigation of this matter,” concluded Senators Warren and Van Hollen. 

Senator Warren has been an outspoken advocate for regulation and oversight of crypto to rein in unchecked illegal activity, and protect consumers and the safety and stability of the financial system:

  • In May 2023, a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called out crypto’s role in fueling the fentanyl crisis and announced she will reintroduce her bipartisan Digital Asset Anti-Money Laundering Act, a bill that would close loopholes in anti-money laundering rules, cutting off drug suppliers and cartels from using crypto to facilitate their illegal business. 
  • In May 2023, at a hearing of the Senate Armed Services Committee, Senator Warren questioned senior intelligence officials about crypto’s threats to national security as the method of choice for countries to evade sanctions and fund weapons programs, support spying, and promote cyber attacks. 
  • In February 2023, at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Warren raised concerns that key parts of the crypto industry are not subject to the same money laundering laws that cover other financial organizations, allowing financial criminals to use crypto to launder billions. 
  • On December 14, 2022, Senators Warren and Roger Marshall (R-Kan.) introduced the Digital Asset Anti-Money Laundering Act of 2022, bipartisan legislation that would mitigate the risks that cryptocurrency and other digital assets pose to the United States’s national security by closing loopholes in the existing anti-money laundering and countering of the financing of terrorism (AML/CFT) framework and bring the digital asset ecosystem into greater compliance with the rules that govern the rest of the financial system.
  • On December 8, 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators to raise concerns about the ties between the banking industry and crypto firms. 
  • On December 6, 2022, Senators Warren, Marshall, and John Kennedy (R-La.) wrote to Silvergate, the bank that reportedly facilitated the transfer of FTX customer funds to Alameda Research, seeking answers about the bank’s role in the loss of billions of dollars in customer funds.
  • On November 30, 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called on regulators to keep crypto out of the banking system following FTX’s collapse.
  • On November 23, 2022, Senators Warren and Sheldon Whitehouse (D-R.I.) sent a letter to the Department of Justice requesting personal accountability for former FTX CEO Sam-Bankman Fried and any complicit FTX executives for wrongdoing following the exchange’s collapse. 
  • On November 22, 2022, Senator Warren published an op-ed in the Wall Street Journal urging federal regulators to use their expansive authorities to crack down on crypto fraud and hold the industry to the same basic standards as other financial activities. 
  • On November 17, 2022, Senator Warren, along with Senator Dick Durbin (D-Ill.), sent a letter to Sam Bankman-Fried, founder and former CEO of FTX Trading Ltd. (FTX), and John Jay Ray III, the newly appointed CEO of FTX, seeking information on the reported misuse of billions of dollars of customer funds and other disturbing allegations that continue to emerge about the company’s fraudulent and illicit practices.
  • On October 25, 2022, Senators Warren and Whitehouse and Representatives Alexandria Ocasio-Cortez (D-N.Y.), Jesús “Chuy” García (D-Ill.), and Rashida Tlaib (D-Mich.) sent a letter to the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, seeking information about the steps each regulator is taking to stop the revolving door between financial regulatory agencies and the cryptocurrency industry.
  • In September 2022, Senator Warren sent a letter to Treasury Secretary Janet Yellen calling on the Treasury Department and the Financial Stability Oversight Council to build a strong regulatory framework for the crypto market.
  • In July 2022, Senator Warren and her colleagues released the findings from an investigation into seven large cryptomining companies – showing extraordinarily high energy use and climate impacts from cryptomining – and called on the EPA and DOE to take action.
  • In May 2022, Senators Warren and Smith, sent a letter to Fidelity, asking the company to explain its decision to allow Bitcoin investments for 401(k) plans, despite the Department of Labor’s warnings about 401(k) crypto investments.
  • In March 2022, Senator Warren, Senate Armed Services Committee Chair Jack Reed (D-R.I.), Senate Intelligence Committee Chair Mark Warner (D-Va.), and Senate Defense Appropriations Subcommittee Chair Jon Tester (D-Mt.) introduced the Digital Asset Sanctions Compliance Enhancement Act to ensure that Vladimir Putin and Russian elites don't use digital assets to undermine the international community’s economic sanctions against Russia following its invasion of Ukraine.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren highlighted the various cryptocurrency tools that could make it easier for sanctioned individuals to hide their wealth and lessen the impact of Russian sanctions.
  • In March 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren warned that cryptocurrency may allow Russia to dodge sanctions and urged stronger regulation of the crypto market to ensure that countries, drug traffickers, cyber criminals, and tax cheats can’t evade economic pain.
  • In March 2022, Senators Warren, Warner, Reed, and Sherrod Brown (D-Ohio), Chair of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Treasury Secretary Janet Yellen, asking about the Treasury Department’s plans to enforce sanctions-compliance guidance for the cryptocurrency industry to ensure that economic sanctions remain an effective tool for achieving foreign policy goals.
  • In December 2021, during a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren raised concerns over the growing risks presented by stablecoins. 
  • In September 2021, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren called on regulators to step up to address crypto's regulatory gaps and ensure an inclusive financial system. 
  • In July 2021, Senator Warren sent a letter to SEC Chair Gary Gensler requesting information about the agency's authority to regulate cryptocurrency exchanges and protect consumers from risks posed by the highly volatile cryptocurrency market.
  • In June 2021, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren delivered remarks on the opportunities and risks that digital currencies present. 
  • In a June 2021 interview, Senator Warren called the market for crypto the “wild west,” and said digital currency is “not a good way to buy and sell things and not a good investment and an environmental disaster.”

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