This is another formal attack on Binance by U.S. regulators, with a sky-high $4 billion fine finally coming.

On November 21, Bloomberg reported, citing people familiar with the matter, that the U.S. Department of Justice was seeking a fine of more than $4 billion from Binance as part of a proposed settlement of a years-long investigation into it.

Binance did not respond to multiple email and phone calls seeking comment. The U.S. Department of Justice also declined to comment. An announcement could come as early as the end of this month, although the situation remains fluid, according to people familiar with the matter who asked not to be identified discussing confidential matters.

A "sky-high fine" of 4 billion. Such a huge fine can be said to be one of the largest investigations of cryptocurrency companies by the U.S. Department of Justice. If Binance and the U.S. Department of Justice agree to a deferred prosecution agreement, the Department of Justice will file criminal charges against the company .

But if Binance meets the stipulated conditions, including paying a substantial fine and agreeing to a factual statement detailing its misconduct, the U.S. will not proceed with the prosecution and establish a process to monitor the company's compliance. This also means that Binance will no longer face criminal investigations.

According to people familiar with the matter, official information may be released as soon as the end of this month, but it is still unstable. The exact timing and structure of the proposed resolution, as well as the exact cost, are unclear. The agreement aims to strike a balance that allows Binance to continue operating rather than risking a collapse, thereby reducing the negative impact on the market and cryptocurrency holders.

Negotiations between the Justice Department and Binance include an agreement in which its founder CZ could face criminal charges in the United States to resolve investigations into alleged money laundering, bank fraud and sanctions violations. The investigation was jointly led by the Criminal Justice Division’s Money Laundering and Asset Recovery Section, National Security Division and the U.S. Attorney’s Office in Seattle.

Sued by the SEC in June, Binance faces multiple battlefields

In addition to the fines from the Ministry of Justice, we all know that the SEC has also engaged in many "games" with Binance in recent times. In addition, the CFTC and regulatory supervision are tightening, and Binance is faced with three enemies .

On June 5 this year, Binance and its CEO CZ were sued by the SEC for allegedly violating securities trading rules. This is the second time that Binance and its CEO CZ have been sued by the CFTC for allegedly violating trading and derivatives rules since March 28. This is the second time that Binance has been sued by U.S. regulators, triggering violent fluctuations in the cryptocurrency market.

The SEC filed charges against Binance Holdings Ltd., BAM Trading Services Inc. ("BAM Trading"), BAM Management USA Holdings Inc. ("BAM Management") and CZ, alleging violations of federal securities laws and disregard for investor protections. . The defendants are accused of illegally marketing crypto-asset securities to U.S. investors and conducting multiple offers and sales of unregistered crypto-asset securities and other investment programs on Binance.com and Binance.US through unregistered online trading platforms. The defendants allegedly made billions of dollars in profits in this manner while putting investors' assets at significant risk.

In response to this announcement, Binance officials wrote: "What is most surprising is that the SEC's actions have weakened the United States as a global center of financial innovation and leadership. In most parts of the world, digital asset laws remain largely unenacted. , enforcement regulation is not the best path forward. An effective regulatory framework requires collaboration, transparency, and thoughtful policy engagement—a path the SEC has abandoned.”

In the early morning of June 14, the federal judge responsible for overseeing the U.S. Securities and Exchange Commission’s case against Binance and BinanceUS refused to order a temporary restraining order to freeze the assets of the U.S. trading platform. Judge Amy Berman Jackson of the District Court for the District of Columbia said there was "absolutely no need" to issue a restraining order. At the same time, the judge ordered BinanceUS to provide the court with a list of its business expenses and ordered the two parties to continue negotiations.

Earlier in the day, the judge hinted that she might be inclined to grant some kind of restriction on Binance’s access to BinanceUS assets, but not a blanket restraining order, ordering the companies to coordinate their proposed restrictions and ordering the SEC to replace the restraining order itself with something the companies proposed. "We are open to continuing to operate our business," SEC attorney Jennifer Farrar told the judge on Tuesday.

Representatives of BinanceUS stated that they mainly hope to obtain normal operating expenses and that they are “unwilling to accept the death penalty represented by asset freezing.” BinanceUS also told the SEC it may cease doing business in the United States, prompting the need for the emergency freeze order, SEC lawyers said. BinanceUS lawyers said the exchange needs to be able to pay ordinary business expenses, such as paying rent, wages, suppliers and software licenses. "The area of ​​consternation for us is the asset freeze, which will be misunderstood by the banks." The judge agreed. "Closing it completely would have a significant impact not only on the company but on the digital asset market as a whole," she told the hearing.

Judge Jackson said the differences between the parties were ultimately minor. If they can reach an agreement, it would give the parties time to properly sort out the details of the case. She referred them to a magistrate to reach a compromise agreement. The judge said that if a deal is reached, she will no longer have to rule on the SEC's request for a temporary restraining order.

Binance responded to the SEC’s asset freeze request by proposing a compromise that included transferring U.S. customers’ crypto assets to new wallets with new private keys that would be controlled solely by BinanceUS’ U.S. staff. In a compromise proposal submitted to the court, the SEC asked Binance to repatriate customer assets to the United States, where they would be under the control of entities beyond CZ’s control and could handle redemptions for customers.

In the previous battle between the SEC and Binance, a Washington, D.C., district judge encouraged Binance to cooperate with the SEC and push for more information about how Binance.US handles customer assets. However, BAM, the holding company of Binance.US, said that the SEC’s requirements for documents are “too broad and onerous,” and the implication seems to be that it is difficult to comply with.

According to a court document on September 18, the U.S. SEC (U.S. Securities and Exchange Commission) launched an attack on the "unstable" issue of Binance.US's asset custody, urged the Washington, D.C., court to approve the inspection of Binance.US, and once again emphasized that Binance .US has not cooperated with the US SEC’s investigation, and the company’s pledge, settlement and brokerage services violated federal securities regulations.

Binance, which has been suffering from regulatory targets for many years, seems to be thinking about how to circumvent compliance.

Forbes published an article last year pointing out how Binance’s internal use of the “Tai Chi” plan was carefully planned to evade local compliance and regulatory policies in the United States. The document includes goals, proposed corporate structure, participation in regulatory plans, and long-term licensing plans. It was written by Harry, a former Binance employee. Zhou coordinated to minimize the influence of U.S. regulatory agencies such as the SEC, CFTC, and NYDFS. In order to gain insight into the regulations of these six major regulatory agencies, he even proposed that Binance join the cornerstone program of the U.S. Department of Homeland Security (DHS) to discover regulatory weaknesses, etc. .

However, Binance denied the allegations in this document and stated that Harry Zhou had never worked at Binance. In this year’s SEC lawsuit against Binance, the “Tai Chi” plan was mentioned again, becoming evidence that Binance evaded U.S. supervision.

Are regulatory fines getting more expensive?

Coinbase’s previous fine of $100 million pales in comparison.

According to January 4, cryptocurrency trading platform Coinbase announced a settlement agreement with the New York State Department of Financial Services, agreeing to pay a $50 million fine and committing to invest $50 million to strengthen its compliance program, which aims to prevent Potential offenders open accounts in New York State.

Previously, an investigation by the New York State Department of Financial Services found that Coinbase allowed customers to open accounts without conducting adequate background checks, which the department claimed violated anti-money laundering laws. According to the Department of Financial Services, as of the end of 2021, Coinbase had a backlog of more than 100,000 alerts about potentially suspicious customer transactions that were not properly checked. Regulators also found that Coinbase conducted only minimal "KYC" checks on people before allowing them to open accounts, and accused the trading platform of treating customer background checks as a "simple box-ticking exercise."

The amount of the $4 billion fine that Binance received is only "comparable" to the settlement amount with the bankrupt cryptocurrency lending platform Celsius Network.

According to July 13, the bankrupt cryptocurrency lending platform Celsius Network was banned from trading and fined US$4.7 billion by the US Federal Trade Commission (FTC). Celsius and its affiliates agreed with the judgment. Celsius said its $4.7 billion settlement with the U.S. Federal Trade Commission (FTC) will not affect its restructuring and recovery of assets for customers.

Although the sky-high $4 billion fine that Binance faces has finally arrived, optimistically speaking, this is also a path to reconciliation given by the regulator, which also means that Binance may no longer face criminal investigations.

According to most people familiar with the matter, the regulatory agreement with Binance is aimed at striking a balance that allows Binance to continue operating rather than risking its collapse, which could negatively impact the market and cryptocurrency holders. A founding partner of Castle Island Ventures also said that “reaching a settlement with the U.S. Department of Justice that includes regulatory provisions may be a compromise that not only protects investors but also allows Binance to develop in a more institutionalized and compliant future. "