Terrorists, drug dealers, cashers. How Binance exchange administrators turned a blind eye to crime

By nigratan 

nigroll.com

3 min

May 3, 2023

View Original

Samuel Lim understood that some clients, in particular from Russia, could be involved in money laundering using Binance for this. In February 2020, in a correspondence with an employee responsible for identifying such transactions, he wrote about such clients: “Come on, we understand that they are here for criminal purposes.” To which the employee replied: “We see the bad, but we close our eyes to it.” She, on another occasion, complained that she needed to write a “fake AML annual report for the board of directors of Binance, wtf.” Lim replied that he was ready to give the management a fake report for signing. At the same time, Lim knew that Binance does not have any board of directors. In their correspondence, they also discussed the possibility of hiring an auditor who, for a formal check, "would hastily bungle an individual partial audit"

Investigative journalist Andrei Zakharov, author of a book on the history of the cryptocurrency movement in Russia, argues that Binance is unlikely to be used for money laundering in Russia: “If you need to withdraw some large amount of money, you can come to the Federation Tower or crypto exchange elsewhere, with a cold wallet on a flash drive and a suitcase of cash, you do not need the services of an exchange. If some large amounts go through Binance, and this can be seen in the blockchain, it can be seen when a “crypt” arrives, which is laundered through a wallet on Binance, then it is believed that you can find out who is behind the wallet, and the security forces can find out too. ” .

Lim also knew that the platform has accounts registered by the Palestinian organization Hamas, which is recognized as a terrorist organization in the United States and other countries. In one of the correspondence in 2019, he explained to a colleague that terrorists usually send "small amounts" because "large amounts mean money laundering." To this, the colleague replied: "You can hardly buy an AK47 for 600 bucks."

Judging by the correspondence presented in the lawsuit, the top management of Binance knew that some clients are on the sanctions lists of the United States and other countries. In 2018, Lim asked Zhao: “Are we going to block the IP addresses of countries that are under sanctions? <…> The risk is that if FinCEN  <the US Treasury Department of Financial Crimes Enforcement - The Insider>  or OFAC  <The Department of Foreign Assets Control of the US Treasury Department - The Insider>  have concrete evidence that sanctions users are registered on the exchange , they can start an investigation or shake the whole world about it.

For VIP clients, Binance had such a service as “notification of law enforcement requests”. In the event that the user's account was blocked at the request of law enforcement agencies, the managers of the VIP client had to contact him "by all available means". “Don't tell the client to run right away: just report that the account has been suspended and that it is being investigated by XXX. If the user  is  a big trader or just smart enough, they will take the hint,”  read  the instruction created by Lim at the behest of Zhao.

Lim understood that all the behavior described above could lead him and other employees to an American prison. In 2020, when the company already had many clients from the United States, he noted that due to the lack of a correct KYC policy, they could face criminal charges. He wrote about this in October 2020  ,  probably after the founders and top management of the BitMEX crypto exchange received not only a civil lawsuit from the futures trading commission, but also a criminal case on similar charges in 2020, and were  arrested .

Reports that hackers, scammers and drug cartels are laundering money on Binance have been in the media for a long time. In June 2022, Reuters  reported that a total of $2.35 billion of dubious origin passed through the exchange over five years. Indefibank CEO Sergey Mendeleev  said that among the wallets that brought money to the exchange were those belonging to the "false miners" of schools and railway stations.

After the charges were filed, CZ tweeted "4"  -  the code word for "Ignore the FUD", that is, "Forget the manipulation."