The hammer of regulatory oversight continues to fall on cryptocurrency exchange giant Binance. Following a November 2023 plea deal with the US Department of Justice (DOJ), a court-appointed independent monitor will be scrutinizing Binance’s compliance efforts for the next three years.
FRA Takes the Reins
Forensic Risk Alliance (FRA), an international consultancy firm, has been tapped by the DOJ for this crucial role. As per a Bloomberg report, FRA will have unrestricted access to Binance’s internal records, personnel, and physical premises. This in-depth monitoring will ensure Binance adheres to all regulatory requirements, a key stipulation of their plea deal involving money laundering charges.
The initial frontrunner for the monitoring role was law firm Sullivan & Cromwell (S&C). However, their prior work for FTX, another crypto exchange that went bankrupt amidst fraud allegations, raised red flags. FTX creditors filed a lawsuit accusing S&C of being complicit in FTX’s “multibillion-dollar fraud.” This potential conflict of interest led the DOJ to select FRA for the Binance monitoring role.
Also Read: Binance Gets Dubai Crypto License: CZ Relinquishes Control for Regulatory Approval
Separate Scrutiny Expected
While FRA oversees Binance’s compliance for the DOJ, reports suggest S&C might still be involved. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is reportedly considering S&C for a separate five-year monitoring role for Binance.
The appointment of FRA comes shortly after Binance’s former CEO, Changpeng Zhao (CZ), faced legal repercussions. In April 2024, CZ was sentenced to four months in prison for failing to implement an effective anti-money laundering program at Binance. Prosecutors initially sought a harsher sentence, but the judge acknowledged a lack of direct evidence implicating CZ in specific illegal activities.
Binance’s Road to Compliance
With a court-appointed monitor and a former CEO behind bars, Binance is demonstrably under intense regulatory scrutiny. The coming years will be critical for the exchange to demonstrate a strong commitment to compliance and rebuild trust within the cryptocurrency industry.
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