Former Securities and Exchange Commission (SEC) official John Reed Stark has suggested that cryptocurrency exchange Binance may face criminal indictment for money laundering, stating the US Department of Justice (DOJ) has likely already filed a criminal indictment against them under seal.
Stark, who worked in the SEC Enforcement Division for almost two decades, says that the recent complaints filed by the Commodity Futures Trading Commission (CFTC) and the SEC against Binance contain allegations that read more like criminal indictments than civil complaints. Binance is accused of fraud, deception, obstruction of justice, and money laundering.
US DOJ Criminal Indictment Expected
Stark believes that the charges against Binance could be related to money laundering since it hides financial assets to use them without revealing the illegal activity that produced them. According to Stark, the DOJ collaborates with the SEC, CFTC, and multiple whistleblowers to create a case against Binance.
The CFTC’s complaint charges Binance’s CEO Changpeng Zhao and three platform-operating entities with violating several CFTC statutes and regulations, as well as former chief compliance officer Samuel Lim. The regulator accused Lim of aiding and abetting Binance’s violations.
The regulator also claimed that Lim knew that some clients were “there for crime.” Moreover, Lim pretended to follow the regulator’s compliance requirements at Binance, as he later acknowledged in a message to a colleague.
In addition to the CFTC’s charges, the SEC filed a 136-page complaint alleging that certain Binance entities and CEO Changpeng Zhao mixed billions of dollars in customer funds and diverted them secretly to a separate firm controlled by Zhao.
The SEC’s emergency motion seeks a variety of remedies, including an order freezing Zhao-controlled BAM companies’ assets and directing defendants to repatriate assets worth billions of dollars held for the benefit of Zhao-controlled BAM Trading’s/BAM Management’s customers.
Binance CEO Accused of Obstructing Justice in Regulatory Investigation
Stark suggests that obstruction of justice may also be a key factor in the ongoing regulatory scrutiny of Binance. Kota Shibata, an attorney at a Japanese law firm, recently claimed that Binance had conducted insider trading and exploited market manipulation. He also stated that Changpeng Zhao asked the team to manage the losses of their future trading.
The CFTC accused Zhao of directing employees to create compliance policies that would enable VIP clients to circumvent securities controls and prevent law enforcement inquiries from affecting their accounts.
According to the CFTC, Zhao also instructed Binance employees to ensure that all communications related to their control subversion take place through applications that facilitate the automatic destruction of evidence. Even the Exchange reportedly used the Signal platform’s auto-delete function to communicate after receiving CFTC document requests and distributing document preservation notifications to its personnel.
While Stark believes that the SEC and CFTC cases against Binance do not heavily emphasize money laundering, he suggests that this is the prosecutorial space that a US DOJ criminal prosecution relating to Binance will likely reserve. He thinks that a criminal case against Binance may be filed or unsealed in the near future.
Binance has refuted all accusations and declared to cooperate with regulators. However, Stark believes that Binance may face even more severe charges shortly.
Featured image from Unsplash, chart from TradingView.com
