11/23/23, 11:47 AM Binance warned VIP customers about investigations, Treasury says

Binance warned VIP customers

about law enforcement
investigations, Treasury says
PUBL I S H ED TUE, N OV 21 2023 6:51 P M E ST

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MacKenzie Sigalos
@KENZIESIGALOS

KEY Binance’s VIP users were granted a set of special privileges, including an early
POINTS heads-up if they were under investigation by law enforcement, according to the U.S.
Treasury’s Financial Crimes Enforcement Network.

Treasury alleged in a 92-page order that Binance had “developed a process to notify
VIP users if they became the subject of a law enforcement inquiry,”

Binance CEO Changpeng Zhao pleaded guilty to criminal charges in the U.S. and
stepped down from his post on Tuesday as part of a $4.3 billion settlement.

Binance’s Co-founder and CEO Changpeng Zhao speaks during the 2022 Web Summit in Lisbon, Portugal, on November 1, 2022.
Nurphoto | Getty Images

Binance’s VIP users were granted a set of special privileges, including an

early heads-up from the crypto exchange if they were under investigation by
law enforcement, according to the U.S. Treasury’s Financial Crimes
Enforcement Network.

Binance CEO Changpeng Zhao pleaded guilty to criminal charges in the

U.S. and stepped down from his post on Tuesday as part of a $4.3 billion
settlement. The plea deal resolves a multi-year investigation into the world’s
largest crypto exchange.

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11/23/23, 11:47 AM Binance warned VIP customers about investigations, Treasury says

Treasury alleged in a 92-page order that Binance had “developed a process

to notify VIP users if they became the subject of a law enforcement inquiry,”
in a setup where Binance was effectively serving as a lookout for its top-tier
customers.

The process, as described by FinCEN, was relatively simple. Members of

Binance’s VIP team were instructed to contact the user under investigation
by “all available means” including sending texts and calling to inform
customers, for example, that their account had been frozen or unfrozen.

According to the consent order, Binance’s VIP team staff were warned not to
be too obvious in their tips.

″‘We cannot in any circumstances directly tell the user to run/withdraw, we

can get sued or undertake personal liability. Giving a strong hint[,] such as
your account is unlocked/your account has been investigated by XXX is
usually a good enough hint of severity,’” the company told the VIP team, the
order said.

Binance’s “VIP Program” caters to higher volume, commercially important

users and offers incentives such as competitive trading fees and higher
limits on order volume to try to keep these patrons happy — and loyal.

According to FinCEN, internal reports from Binance indicated that in 2019,

VIP customers “consistently accounted for between two-thirds and three-
quarters of both trading volume and trading revenue on Binance.com,
adding that “Binance thus had significant commercial motivations to go to
great lengths to support these VIP users.”

Despite rules forbidding people in the U.S. from trading on the platform,
users in the U.S. “represented a crucial element of the VIP userbase,” at
some points accounting for as much as 20% of all transaction fees on the
exchange.

FinCEN found that Binance helped U.S. customers, including the most
commercially lucrative U.S. Enterprise Users in Binance’s VIP program, to
circumvent the ringfencing policies the exchange itself had put into place to
comply with local laws.

One such approach included encouraging users to alter know-your-

customer documentation to give the false impression they were not in the
U.S., as well as using a virtual private network, or VPN, to cover a user’s
geographic footprint, “even though Binance would know that the user was, in
fact, located in the United States.”

“These users were so valuable to Binance that personnel were instructed

not to off-board them,” read the FinCEN report.

In Dec. 2020, a member of Binance’s VIP team wrote, “We will not be
restricting the top 100 [users] (even after sending them emails [about
restrictions applicable to U.S. users who remained on Binance.com]). They
will be managed by your [VIP] team. [The CEO’s] idea is that they should

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11/23/23, 11:47 AM Binance warned VIP customers about investigations, Treasury says

have enough time to create or find new non-US entities,” the consent order
stated.

FinCEN said that Binance ultimately executed on this plan and took
additional steps to conceal its retention of U.S. users.

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