Binance Compliance Hires Didn’t Allay CFTC Investigators’ Concerns

The CFTC came up with in-depth allegations against Binance even though it says its global compliance team is larger than the total strength of employees at most exchanges

article-image

Grey82/Shutterstock modified by Blockworks

share

Binance was sued by the Commodity Futures Trading Commission this week for allegedly evading trading and derivatives rules. 

The crypto exchange operated without proper registration and illegally allowed Americans to trade crypto derivatives on its platform, according to the regulator. Binance called the CFTC’s complaint “unexpected and disappointing,” saying it had worked collaboratively with the agency for more than two years.

CEO Changpeng Zhao himself said that the lawsuit contained an “incomplete recitation of facts” and that the company does not agree with the CFTC’s depiction of several concerns raised.

But what’s interesting to note is that the exchange was hit with an exhaustive list of allegations, despite having a solid team with expertise in financial crimes.

It appears to be a question of timing, as much of the conduct at issue took place before Binance dramatically ramped up its compliance efforts, according to Leo Mizuhara, CEO of DeFi asset management platform Hashnote.

“If you broke the law in 2019, then it doesn’t matter that you reformed your behavior in subsequent years,” Mizuhara told Blockworks.

‘A’ for effort Binance, but…

Binance’s efforts do count for something in the eyes of regulators, per Dave Weisberger, CEO of algorithm-trading platform CoinRoutes.

“The CFTC does care that Binance has hired a global team of compliance experts — but it’s more complicated than this,” Weisberger told Blockworks. “Both the CFTC and SEC consider actions against organizations for previous actions important for deterring future bad behavior.”

Binance can argue that it already has taken steps to beef up compliance, pointing to recent history.

In Sept. 2021, Binance hired Nils Anderson-Röed, a former dark web specialist at Interpol, to lead investigations into offenders trying to commit crimes on the exchange. 

Around the same time, Tigran Gambaryan, a former special agent with the Internal Revenue Service, was appointed Vice President of Global Intelligence and Investigations. His career history includes investigations in bank secrecy act violations, terrorism financing and one of crypto’s biggest heists ever — the Mt. Gox hack.

Less than three months ago, Anderson-Röed was promoted to the position of deputy head of financial crime compliance. And only last month, Binance hired Noah Perlman, who has served as a global head of financial crimes at Morgan Stanley and as division counsel at US Drug Enforcement Administration New York, as chief compliance officer.

Back in 2021, Zhao had openly said that Binance would double the size of its global compliance team by the end of that year, as the industry was facing “a lot of uncertainty.” 

Gambaryan rebutted comparisons to FTX by some observers, saying Binance’s compliance team is larger than the total number of employees at most exchanges, while FTX’s had virtually none.

“We are proud to have in our ranks some of the most celebrated cyber investigators representing virtually every single major international law enforcement agency across the globe,” a Binance spokesperson told Blockworks. 

“Just as they did during their time in the public sector, the investigators in our financial crimes compliance team are working hard on the front lines to protect users from illicit actors seeking to access the crypto markets,” the spokesperson said.

Weisberger thinks that whatever good will is engendered by Binance’s efforts only goes so far in light of other evidence.

“What struck me about this case as being important — and why I think Binance will likely have to settle with the CFTC — are the emails that allegedly prove that Binance worked with firms based and regulated in the United States to help them evade the rules,” Weisberger said.

Regardless of its investments in financial crime experts, Binance other behavior is still a big deal for the agency.

“The CFTC only cares about whether or not a crime has been committed, and changes to behavior taken after the alleged crime likely won’t be enough,” Mizuhara said.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million

article-image

Plus, funds go to a platform making development on Solana easier