Binance Exchange, the world's largest platform for trading digital currencies, would be the subject of a new investigation by US federal authorities. While the Binance investigation is not a new event, the circumstances surrounding the collapse of FTX Derivatives Exchange and the role of Binance CEO Changpeng “CZ” Zhao prompted prosecutors to request new information from financial firms.
The new investigation was prompted by US prosecutors in Seattle, according to a report released by The Washington Post over the weekend, according to two sources who reviewed the subpoenas issued.
Binance's huge market share has come under scrutiny over the past 4 years. To give an idea of the size of the exchange, according to data from CoinMarketCap it recorded a trading volume of $13,2 billion in 24 hours. This compares with $1,86 billion from Coinbase and $575 million from Kraken, two trading platforms that continued to benefit from the collapse of their main rival, FTX US.
In addition to the US Attorney's office in Seattle, the Justice Department's money laundering arm and the National Cryptocurrency Enforcement Team are also involved in this investigation.
“As has been widely reported, regulators are carrying out a major overhaul of the entire cryptocurrency industry to address many of the same issues,” a Binance spokesperson told Decrypt. “This fledgling industry has grown rapidly, and Binance has demonstrated its commitment to security and compliance through large investments in our team, as well as the tools and technology we use to detect and deter illegal activity.”
Binance is under scrutiny because CZ's Nov. 6 tweet is believed to have triggered the liquidity crisis that drove the FTX Exchange into bankruptcy.
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At present, there seems to be no cause for panic for the Binance community, as the parent entity of Binance is not a US company. Any type of accusation could be brought against Binance US, however sources say prosecutors are not entirely convinced that the evidence available to them is sufficient to file charges against the trading platform.
Regarding the current investigation into CZ's role in hastening FTX's demise, the cryptocurrency veteran has always argued that a single tweet isn't enough to bring down a company, unless it's already on the path to collapse. . In CZ's tweet he revealed that he will sell the exchange's FTX tokens worth over $600 million.
With FOMO in the community, the price of the TLT coin plummeted, exposing the fragility of the finances of FTX and Alameda Research, both of whose balance sheets were supported primarily by the exchange's native currency.
The Binance investigation dates back 4 years and involves several other allegations, including that it allowed US residents to trade derivative products on its global platform. Binance said it is handling these investigations by cooperating with prosecutors. The trading platform also has a number of former government officials on its payroll to help navigate its complex regulatory landscape.