Key facts:
Journalistic investigation uncovers criminal groups that used Binance for money laundering.
Binance said that the report is riddled with falsehoods, jumping to conclusions, and poor data.
The cryptocurrency exchange Binance woke up on June 6 with the publication of an independent investigation that questions its use. This asserts that it has become “a center for hackers, swindlers and drug traffickers.” The situation led the company to publicly deny the allegations hours later, saying the report spreads a myth that sells a false narrative.
The investigation is from the international news agency Reuters. In this one warns that in the last five years Binance processed at least $2.35 billion in cryptocurrency transactions stemming from hacks, investment fraud, and illegal drug sales. He contends such a figure stems from court records, police statements and blockchain data, which they compiled through two explorers and backed up by two unnamed industry experts.
From 2017 to 2022, buyers and sellers on the world’s largest darknet drug market, a Russian-language site called Hydra, used Binance to make and receive $780 million worth of cryptocurrency payments. , says the document. The data was obtained by analytics firm Crystal Blockchain and another anonymous.
Following this case, he said that a user named Alexandra, from Moscow, started buying mephedrone and ketamine from Hydra in 2019 to help deal with her bipolar disorder. Payments were made through Binance using a first namesince his friends who already used it had recommended that it was the safest way to pay distributors.
“The anonymity of the system made it easier to buy drugs on the dark web,” Alexandra said. ‘It was like buying chocolate at the store,'” Reuters estimated. In this way, she clarified that its methods of knowing the client, known as “KYC”, were not being effectively strengthened, despite the fact that the company communicated this idea to combat money laundering.
The agency also indicated that a North Korean hacking group known as Lazarus used Binance with encrypted emails to launder some of the $5.4 million it had stolen of the Eterbase cryptocurrency. He reported that it was one of the robberies he committed to finance North Korea’s nuclear weapons program.
“The missing money from Eterbase is part of a torrent of illicit funds that flowed through Binance,” the investigation states. While acknowledging that the firm had no idea who was moving money through its exchange, Eterbase co-founder Robert Auxt, whose firm has been unable to locate or recover the funds, was said by Eterbase co-founder Robert Auxt to say.
In CriptoNoticias we were able to confirm for months that, according to the direct testimony of users and the lawyer Paula Bermúdez, there is an open police investigation of money laundering in Binance that has led to the confiscation of the funds of some users in Latin America. Even despite the fact that those affected claim that they are not related to illegal activities and have not been given space to prove their presumed innocence.
Reuters says: Binance did not want to talk about money laundering cases; but exchange denies it
Reuters reported that Binance was refused to make Binance CEO Changpeng Zhao available for an interview. He noted that, in response to written questions, communications director Patrick Hillmann said he did not believe the investigation’s estimate was accurate. And he asserts that they have not responded to his requests to provide the figures of the identified cases.
Hours after the publication of the Reuters journalistic investigation, Binance issued a release denying that they had refused to discuss such money laundering cases. He showed the emails that he sent with the news agency, where they answer some of his questions. One of the comments that you can see they gave him was the following:
It would be inappropriate to comment on law enforcement requests both for client protection reasons and to protect investigative measures. We are addressing these crimes on multiple fronts: providing law enforcement with actionable assistance, primarily in the form of identifying victims and suspects, and, where possible, freezing criminal proceeds.
Binance, global cryptocurrency platform.
On this line, he added: “We have already participated in a debate with several law enforcement agencies about the modus operandi used by different criminal groups, as well as the measures that can be taken to effectively fight against fraudulent investment schemes” .
The company maintained that they continue to focus on crime prevention on their platform. “Like many companies in both the traditional and cryptocurrency industries, we run a series of automated and manual internal checks of which we cannot disclose to avoid tipping off criminals,” he added.
Binance also estimated that they were offered the chance to speak with the two lead researchers who led the work to take down Hydra and Lazarus, but this was turned down by Reuters.
Binance Claims Investigation Is “Full of Falsehoods and Poor Data”
The crypto asset company recalled that it debunks “the myth, often promoted by industry adversaries, that cryptocurrencies are a ‘haven’ for illicit money laundering.”
Sadly, our industry has to continue to address these issues over and over again as stakeholders continue to spread disinformation or deliberately mislead the general public by omitting critical context, such as how much more cash cryptocurrencies are to throw away than the traditional banking system. sunlight on illicit activity.
Binance, global cryptocurrency platform.
Without naming it directly, Binance warned that the article that had been published during the day was another one written by the author of “breathless pearl grab”. He added that his report “is riddled with falsehoods, massive jumps to conclusions, and based on poor data that could have been verified by contacting a major on-chain analyst firm, such as Chainalysis or TRM.”
We suggest you ignore those authors and pundits who curate data, rely on conveniently unverifiable “leaks” from regulators, and fuel the cult of crypto paranoia for fame or financial gain. Instead, just look at the facts. Neither our industry nor Binance is perfect, but we have grown by leaps and bounds in the last three years. Crypto is a completely new innovation. And like many regulators and policymakers, we are still working out what an appropriate regulatory framework should look like.
Binance, global cryptocurrency platform.
The company concluded that, according to Chainalysis, of all transactions made with cryptocurrencies in 2021, 0.15% were associated with some type of illicit activity. In contrast, he reported that the UN estimates that between 2% and 5% of traditional fiat cash ($800 billion to $2 trillion) was associated with some form of illicit activity. Which is why he highlights that cryptocurrencies are “incredibly transparent, infinitely more so than the traditional cash economy, and it’s well documented.”