Although there has been no official comment, the DoJ may consider a fine against Binance instead of officially indicting the company.
The United States Department of Justice (DoJ) is currently considering bringing fraud charges against major cryptocurrency exchange Binance. However, the government agency is reportedly worried about a bank run as a possible effect of filing official charges against the exchange.
Semafor reported that federal prosecutors are concerned about what potential fraud charges could cost the exchange’s customers. According to a report, customers may lose money and eventually see heavy panic in the crypto markets. DoJ officials believe that the effect of these charges could throw Binance into a similar fate as that of FTX. Already, the price of Binance’s native BNB token and Bitcoin (BTC) fell in reaction to the news.
Federal prosecutors are now considering alternative measures to bring Binance to book, including deferred agreements, fines, and non-prosecution agreements. The aim is to ensure Binance suffers the consequences of alleged violations without risking consumers and their funds.
So far, neither Binance nor the DoJ has made an official comment on the matter.
The current situation continues the unending rift between crypto companies and regulatory authorities within and outside the US. Crypto exchanges and other firms have long accused US authorities of using enforcement action to regulate the sector in the country instead of providing regulatory clarity.
The market will watch matters unfold in the near future as the DoJ considers what action is appropriate for Binance. The DoJ will likely want to send a message to the market and other firms about the consequences of violating laws. Giving Binance a free pass may cause other exchanges to relax on compliance matters.
DoJ Joins SEC in Pursuit of Binance
Regardless of the DoJ’s decision, Binance now has to face more regulatory investigation following its recent indictment from the United States Securities and Exchange Commission (SEC). Last month, the SEC accused Binance of violating various laws by mishandling customer funds and allowing US customers to trade outside the Binance US platform. The SEC also said Binance illegally funneled customer funds through a separate entity in the control of Binance CEO Changpeng Zhao. In addition, SEC exec Gurbir S. Grewal also said Binance “consciously chose to evade” rules to “ maximize their own profits”.
Binance responded to the lawsuit promising to take it seriously. However, the exchange said it was disappointed that the SEC disregarded “good-faith discussions” in favor of a lawsuit.
Last week, the SEC leveled another allegation against Binance, claiming that the exchange faked its trading volume to appear successful. Accusing BInance of wash trading, the Commission said Binance sometimes traded with itself to boost trading activity.
Binance has also accused the SEC of issuing false and misleading statements. According to a Binance filing at the US District Court for the District of Columbia on June 21, Binance said the SEC’s comments aimed to introduce “unwarranted confusion into the marketplace”. The exchange maintains that the SEC has no evidence that Binance commingled user funds.
Binance has also endured regulatory scrutiny from authorities outside the US. Last month, officials of the Australian Securities and Investments Commission (ASIC) raided Binance offices in Australia as part of investigations over alleged violations.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
