The investigation by Richard Blumenthal, the senior Democratic senator from Connecticut, centers around Binance, the leading cryptocurrency exchange by trading volume. The senator is probing allegations that the exchange facilitated money laundering schemes linked to Iran and evasion of sanctions associated with the Russian oil market.
In a recent communication addressed to Binance CEO Richard Teng, Blumenthal referenced several credible reports from major publications. These reports claim that Binance partners, specifically Hexa Whale and Blessed Trust, operated as middlemen for illegal transactions involving Iranian government entities and terrorist groups, including the Houthis, as well as connections to Russia’s undeclared oil vessels.
Evidence suggests that Binance allegedly maintained around 2,000 accounts linked to Iranian activities and permitted nearly $2 billion in transfers, all despite internal alerts and complaints about compliance issues. There are indications that compliance personnel who raised these concerns were either dismissed or sidelined, raising further questions about the exchange's adherence to regulations.
Additionally, Blumenthal is questioning Binance's compliance stance given its recent guilty plea in 2023, alongside its founder Changpeng Zhao, which stemmed from activities involving over $1 billion in transactions to sanctioned entities. As part of that resolution, Binance agreed to pay $4.3 billion in fines and accepted oversight from an independent compliance monitor.Then there are concerns regarding Binance's associations with World Liberty Financial and diplomatic connections, which may have influenced regulatory leniency, including the dismissal of lawsuits and a presidential pardon granted to Zhao.
As part of the investigation, the senator has requested detailed records from Binance on the alleged transactions and any documentation concerning the use of cryptocurrencies like Tether and USD1 for illicit finance. Moreover, records explaining the termination of compliance staff are also on the senator’s agenda.
The deadline for Binance to furnish the requested documents is set for March 6, adding urgency to an already intensive regulatory landscape for the exchange. Following its prior legal difficulties in 2023, the company's former chief executive Zhao resigned amid these controversies. Notably, he received a pardon from former President Donald Trump in October 2022 after completing a prison term.
In response to the allegations, Binance has disputed the claims, asserting that its exposure to any activities associated with Iran has decreased significantly by nearly 97% since January 2024. They also deny terminating employees for voicing compliance concerns, emphasizing their commitment to meet regulatory obligations and clarity in their operations. The exchange is actively seeking corrections to recent media narratives that they believe misrepresent their compliance and operational integrity.