Report: Binance Created Binance.US as Shield From Regulators

Fearing prosecution, Binance reportedly created its U.S. platform as a shield from regulators.

That’s according to a lengthy Sunday (March 5) report by The Wall Street Journal (WSJ), citing internal documents and messages and interviews with former employees of the world’s largest cryptocurrency company.

The report says those messages and interviews show a strategy by Binance to create Binance.US – an apparently independent company — to protect itself from financial regulators who have of late been intensifying their scrutiny of the company.

In addition, the WSJ says its reporting shows Binance and Binance.US are more connected than the two companies have let on, mixing staff and finances. Binance developers in China also maintained software code for users’ digital wallets, potentially letting Binance access American customer data.

The report also shares texts between employees of the two companies from 2019 that illustrate their close involvement.

A Binance spokesperson told PYMNTS Sunday that the agreement between Binance and its U.S. operation is common in their industry, with Binance’s founders licensing the tech stack to other organizations that weren’t affiliated with the company.

“That is why you’re seeing these old communications between members of the two organizations,” the spokesperson said.

“Additionally, it’s important to note that Binance.com and Binance.US shared the same ultimate beneficial owner which has been public knowledge since inception,” the spokesperson told PYMNTS. “Binance.US however has recently gone through a funding round, whereas Binance.com has not.”

The news comes as Binance.US is facing objections to its planned $1.02 billion purchase of bankrupt crypto firm Voyager Digital.

Last week, three U.S. senators sent a letter to Binance CEO Changpeng Zhao and Binance.US CEO Brian Schroder alleging that Binance is a “hotbed of illegal financial activity” and demanding information about the companies’ finances and regulatory compliance work.

As PYMNTS has reported, Binance is apparently the focus of U.S. Justice Department (DOJ) probe into allegations that include unlicensed money transmission, conspiracy and criminal sanctions violations.

The Binance spokesperson told PYMNTS Sunday that the company has admitted to having inadequate compliance and controls in the past, including a lack of proper know-your-customer (KYC) controls.

“While growing at such a rapid pace, we made some initial missteps which have now been rectified,” the statement said. “Following a massive investment in compliance talent, processes, and technology over the past two years, we are a very different company today when it comes to compliance.”

Last month, Binance Chief Strategy Officer Patrick Hillman said in a WSJ interview that the company would have to “make amends” for its past compliance gaps. He said those amends might mean “a fine, could be more. … We just don’t know. That is for regulators to decide.”