DOJ Weighs Fraud Charges against Binance, Worried about Bank Run: Report

US prosecutors are mulling over whether to initiate criminal charges against Binance, thereby turning the heat on 13 civil charges filed by the securities watchdog against the top crypto exchange earlier in June, Semafor reported today (Wednesday), citing insider sources. However, the Department of Justice (DOJ) is worried that such action could lead to a bank run, throwing the exchange into a position similar to that of the now-bankrupt crypto exchange, FTX.

Prosecutors Contemplate Charges

According to the report, the DoJ is contemplating opting for other measures such as fines and deferred or non-prosecution agreements (NPAs). An NPA means that the federal prosecutor, despite believing that a crime has been committed, will delay prosecution in exchange for the crypto firm's compliance with certain conditions.

These conditions could range from payment of fines and the institution of corporate reform to full cooperation with the department's probe. In such cases, the charges are dismissed if the defendant complies with the conditions.

Binance, the biggest global crypto exchange in terms of trading volume, entered the US crypto market in September 2019 after obtaining registration from the Financial Crimes Enforcement Network (FinCEN) for its affiliate in the country. The local unit was to serve US customers independently of the global exchange.

Regulatory Hurdles in the US

However, in recent months, pressure has mounted on the crypto exchange with regard to its operations in the United States. In June, Senators Elizabeth Warren and Chris Van Hollen asked the DOJ to look into whether Binance made false representations to lawmakers earlier in March about its business dealings and ties to its local unit

The US lawmakers’ request came days after the SEC accused Binance and its CEO, Changpeng Zhao of operating illegal trading platforms, offering unregistered crypto asset securities and commingling customers’ funds. Two months earlier, the Commodity Futures Trading Commission (CFTC) made similar allegations against the exchange and Zhao.

However, Binance in its response said the allegation that users' assets on its US trading platform were at risk was "simply wrong.” The exchange also recently slammed the securities watchdog over a recent press statement in which the agency claimed Binance commingled customers’ assets with company resources. Binance in a motion asked the district court in Columbia to order the SEC “to comply with all applicable rules of conduct concerning extrajudicial statements.”

Furthermore, the exchange and its CEO are planning to seek the dismissal of charges filed by the CFTC in March, Finance Magnates recently reported. However, recent media reports suggest that Zhao was aware of wash trading activities on Binance.US, which is one of the allegations in the SEC's lawsuit. Reports also suggest that the Binance's CEO also considered shutting down the US affiliates earlier this year to protect the crypto exchange’s wider global operations.

IG's share buyback; new features on Fortex; read today's news nuggets.