Binance’s Lapses: A Gateway for Terrorists, Hackers, and Sanctions Violators

According to US prosecutors, Binance Holdings Ltd. had insufficient regulations in place for cryptocurrency transactions on its exchange, allowing terrorists, hackers, and individuals violating sanctions to utilize it as a means to transfer billions of dollars for an extended period of time.

Binance and CEO Changpeng Zhao pleaded guilty to criminal charges on Tuesday, admitting they failed to implement basic anti-money laundering measures that are the basis of the government’s efforts to control the flow of dirty money worldwide. Binance will pay $4.3 billion, while Zhao will step down as CEO and pay a $50 million fine.

A stunning turn of events means that Zhao, the world’s most powerful crypto personality, will be jailed and no longer running the industry’s biggest exchange. It comes after years of investigations by federal prosecutors and the fraud conviction earlier this month of Sam Bankman-Fried, the disgraced founder of the collapsed FTX exchange.

Binance employees engaged in a wide range of wrongdoing, and many were aware of the consequences of allowing millions of illegal transactions, according to the Justice and Treasury Department’s Financial Crimes Enforcement Network, or FinCEN.

“Binance turned a blind eye to its legal obligations in the pursuit of profit,” Treasury Secretary Janet Yellen said in a statement. “Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform.”

Because of these failures, USA said, Binance allowed the following to happen:

• Al-Qassam Brigades, the military wing of Hamas, used Bitcoin transactions to raise money for the Palestinian resistance movement. Hamas, designated a terrorist organization by the United States, murdered more than 1,200 Israelis on October 7. According to FinCEN, Binance did not submit any suspicious Hamas fundraising notifications to the United States.
• Binance allowed Bitcoin transactions with other terrorist organizations, including al-Qaeda and ISIS, FinCEN said.
• People living in Iran made at least 1.1 million transactions worth $899 million, in violation of U.S. sanctions, the company admitted.
• Exchange users in Cuba and Syria, as well as Ukraine’s Crimea, Donetsk and Luhansk regions, conducted millions of dollars worth of transactions in violation of US sanctions, Binance admitted.
• Binance users made $275 million in deposits from BestMixer, the crypto platform that helped pave the way for digital money, the company said. Dutch authorities shut it down in 2019, saying it was “probably used to hide and launder criminal money flows”.
• Customers transferred $106 million in Bitcoin from Hydra Market, a Russian darknet marketplace, to Binance wallets between 2017 and 2022, the company admitted. US and German authorities seized Hydra’s servers in 2022, calling it the world’s largest and most visible darknet market. It sold hacking software, fake IDs, and illegal drugs like heroin, cocaine, and LSD.
• Binance addresses processed tens of millions of dollars in transactions involving 24 ransomware strains including SamSam, Satan, and WannaCry. Although the company worked with law enforcement when notified, it deprived authorities of critical information about those attacks, FinCEN said. In 2021, the United States charged three North Korean military hackers with the WannaCry attacks.
• FinCEN said more than 1,000 trades were made on three marketplaces dealing in child pornography and related material. The administrator of one of these sites, Dark Scandals, was indicted in 2020. The site featured violent rape videos.