Binance Under Three-Year Monitoring by Forensic Risk Alliance, DOJ Confirms

• DOJ picks FRA over Sullivan & Cromwell to monitor Binance, aiding compliance efforts after money laundering allegations.

• FRA was chosen over Sullivan & Cromwell due to controversy, ensuring compliance with the plea agreement.

The United States Department of Justice (DOJ) has appointed Forensic Risk Alliance (FRA), a consulting firm based in London, as the monitor for Binance, the world’s largest cryptocurrency exchange. This move comes as part of Binance’s plea deal with the DOJ last year following allegations of money laundering violations. 

Under the terms of the deal, Binance agreed to pay $4.3 billion in fines and appoint an independent compliance monitor. The appointment of FRA signifies a significant step in Binance’s efforts to address regulatory concerns and ensure compliance with the law.

FRA Over Sullivan & Cromwell

In a recent Bloomberg report, anonymous sources revealed that Forensic Risk Alliance was selected over Sullivan & Cromwell, a prominent Wall Street law firm, to serve as the independent monitor for Binance Holdings Ltd. The monitor’s primary responsibility is to assess Binance’s practices, ensure compliance with the plea agreement terms, and foster an effective ethics and compliance program.

The decision to opt for FRA instead of Sullivan & Cromwell may have been influenced by controversy surrounding the latter’s involvement with the now-defunct FTX exchange. FTX creditors filed a class action lawsuit against Sullivan & Cromwell, alleging complicity in the exchange’s collapse. While FTX’s new management has defended Sullivan & Cromwell, the fallout from this controversy potentially swayed the DOJ’s decision.

While Sullivan & Cromwell missed out on the DOJ monitorship, it is still expected to secure a separate five-year monitorship for Binance on behalf of the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This dual oversight underscores the seriousness of regulatory bodies approaching Binance’s compliance obligations.

Canada Fines Binance for Compliance Issues

In addition to its challenges in the United States, Binance is also facing regulatory scrutiny in other countries. Most recently, Canada’s financial regulator, FINTRAC, fined Binance $4.4 million (C$6 million) for failure to comply with anti-money laundering regulations. The fine was imposed due to Binance’s failure to register with FINTRAC and report large virtual currency transactions, highlighting the company’s ongoing compliance issues on a global scale.

Despite these challenges, Binance has reiterated its commitment to enhancing compliance measures. The establishment of its inaugural board of directors marks a strategic step in this direction, signaling the exchange’s dedication to addressing regulatory concerns and bolstering transparency.

Binance remains under intense government scrutiny, with FRA set to monitor its activities for the next three years. Despite ongoing legal battles, including a ruling pending on a joint motion to dismiss, Binance continues to navigate challenges, including disputes with regulatory bodies over the status of stablecoins like BUSD.

Former CEO’s Legal Troubles

The DOJ’s appointment of FRA comes amidst legal troubles for Binance’s former CEO, Changpeng “CZ” Zhao. Zhao was recently sentenced to four months in prison for his failure to maintain an effective Anti-Money Laundering (AML) program at the crypto exchange. While prosecutors initially sought a three-year prison term, the judge ultimately decided on a shorter sentence, citing a lack of evidence linking Zhao directly to specific illegal activities at Binance.