The U.S. attorney’s office for the Western District of Washington in Seattle has asked U.S.-based hedge funds for their records of communications with crypto exchange Binance, the Washington Post reported this weekend, citing two people familiar with the matter.
The subpoenas are part of a federal investigation into Binance’s potential evasion of U.S. money laundering rules. The investigation dates back to 2018, Reuters reported.
It’s unclear why Seattle’s office is involved in the investigation, but it has a history of pursuing cyber crimes, including other crypto-related cases.
In November, the Seattle office charged two Estonian citizens for a massive cryptocurrency and money laundering scheme. In May, a father and son were sentenced to five years in prison in a case that involved an unlicensed bitcoin exchange business.
The Seattle office has partnered with the Money Laundering and Asset Recovery Section (MLARS) and agents from the IRS Criminal Investigation division for the case, Reuters reported.
A spokesperson for the U.S. Attorney’s Office in Seattle said it is the “policy of the Department of Justice to neither confirm nor deny an investigation unless and until something is filed in court.”
Binance, founded in 2017, is the world’s largest cryptocurrency exchange by trading volume. Binance has reportedly been a haven for financial crimes for years as it let users easily trade cryptocurrencies without properly identifying themselves. This has “long frustrated financial regulators and law enforcement agencies,” the Post reported.
A Reuters investigation in June found Binance handled at least $2.35 billion from 2017 to 2021 of ill-gotten gains, which stemmed from hacks, investment frauds and illegal drug sales. A separate study in June by Chainanalysis found crypto-related crime in the broader industry reached an all-time high of $14 billion in 2021, up from $7.8 billion the year prior.
Know your customer compliance laws, also known as KYC, require financial institutions to verify their client’s identities. These measures are in place largely to prevent people from laundering cash.
The crypto industry is under increasing scrutiny from prosecutors, regulators and politicians after the swift collapse of the giant digital-asset exchange FTX as its founder Sam Bankman-Fried faces a bevy of criminal charges. Last month, Sen. Elizabeth Warren (D-Mass.) and Sen. Tina Smith (D-Minn.) pressed U.S. bank regulators to investigate the ties between the banking industry and cryptocurrency firms.
