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The Binance logo is seen on a smartphone on May 24, 2019. Photo: LightRocket via Getty Images

Binance execs’ texts and documents show plan to avoid US scrutiny with intertwined domestic crypto exchange, WSJ reports

  • Potential for ‘nuclear fallout’ from US investigation prompted Binance to start a new entity in the country in 2019, according to private chats seen by the WSJ
  • Binance and its US entity are more intertwined than previously disclosed, mixing staff and finances, possibly exposing the company to US oversight

Binance, one of the world’s largest cryptocurrency exchanges, developed a plan to avoid the threat of prosecution by US authorities as it started an American entity in 2019, The Wall Street Journal reported on Sunday.

Any lawsuit from US regulators, who had signalled a coming crackdown on unregulated offshore crypto players, would be like “nuclear fallout” for Binance’s business and its officers, the WSJ said, citing a Binance executive’s warning to colleagues in a 2019 private chat.

The report is based on messages and documents from 2018 to 2020 reviewed by The Wall Street Journal as well as interviews with former employees.

Binance moved US$400 million from US to firm managed by CEO Changpeng Zhao

Binance, founded in 2017, and Binance.US are more intertwined than the companies have disclosed, mixing staff and finances, and sharing an affiliated entity that bought and sold cryptocurrencies, the report said.

It noted that operated mainly from hubs in China and Japan, yet a fifth of its customers were based in the United States. Binance.US is headquartered in San Francisco.

Binance developers in China maintained the software code that supported Binance.US users’ digital wallets, potentially giving Binance access to US customer data, the WSJ reported.

Since 2020, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have been investigating Binance’s relationship to Binance.US, the report said, citing subpoenas and people familiar with the matter. If US regulators determine that Binance has control over its US entity, they could claim the power to police Binance’s entire business.

In an emailed statement to Reuters, a Binance representative said: “We have already acknowledged that we did not have adequate compliance and controls in place during those early years … we are a very different company today when it comes to compliance.”


Is cryptocurrency too risky for China?

Is cryptocurrency too risky for China?

Binance.US, the SEC and DOJ did not immediately respond to Reuters’ requests for comment.

Binance is under heightened scrutiny as three US senators this week asked the giant cryptocurrency exchange and Binance.US for information about their regulatory compliance and finances.

Reuters has reported that Binance.US was created as a de facto subsidiary in 2019 to draw the scrutiny of US regulators away from