DOJ Investigates Binance for Russia Sanction Violations

Federal authorities are reportedly probing whether cryptocurrency exchange Binance violated U.S. sanctions against Russia.

The U.S. Justice Department’s investigation centers on whether the company was used to allow Russians to avoid the sanctions, Bloomberg News reported Friday (May 5), citing people familiar with the matter.

According to Bloomberg, sources say the investigation — by the DOJ’s national security division — is operating parallel to another investigation by its criminal division. 

PYMNTS has contacted Binance for comment but has not yet received a reply. The Bloomberg report said Biancne has been in discussions with the DOJ to resolve earlier complaints that it was used to skirt sanctions against Iran, per unnamed sources.

This new probe is the latest in a series of investigations involving the world’s largest cryptocurrency exchange, coming during a time of heightened scrutiny into the sector. 

For example — as noted here Friday — the Securities and Exchange Commission (SEC) and its Chairman Gary Gensler have been upping their enforcement actions against the crypto industry over the past two years.

In 2022, the SEC brought a total of 30 cryptocurrency-related enforcement actions, up 50% from 2021. And in the first months of this year, the agency has issued 13 enforcement actions, which is on pace for an increase of more than 25% compared to last year’s numbers.

“Industry observers, along with market participants, are increasingly of the view that federal regulators will continue to come down heavily on larger crypto companies to set precedents for new regulation this year,” PYMNTS wrote.

“We are 100% committed to the U.S. because rule of law prevails here,” Coinbase CEO Brian Armstrong told investors on the company’s first-quarter 2023 earnings call last week, stressing that it was “really important for America to get this [crypto regulation] right.”

From the SEC’s perspective, it has already gotten regulation right — and companies need to acknowledge that prevailing fact by coming into compliance.

“Given that most crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the SEC,” Gensler told the House Financial Services Committee last month, adding that the crypto industry currently entails “risks and conflicts the commission does not allow in any other marketplace.”

In addition to pressure from the DOJ and SEC, Binance was also recently sued by the 

Commodity Futures Trading Commission (CFTC) in a legal action that accuses the company and founder/CEO Changpeng Zhao of circumventing U.S. compliance rules to boost profits.

All the same, the commission is reportedly open to working with Binance.

“We’ve been in continuing conversations with the business to describe what we understand is potentially problematic conduct and to give them an opportunity to explain that conduct and to help us find a path forward,” Kristen N. Johnson of the Commodity Futures Trading Commission (CFTC) said in a CNBC interview in late April.