Binance’s Co-founder and CEO Changpeng Zhao symbolizes during the 2022 Web Summit in Lisbon, Portugal, on November 1, 2022.
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Binance’s VIP users were granted a set of different privileges, including an early heads-up from the crypto exchange if they were under investigation by law enforcement, according to the U.S. Resources’s Financial Crimes Enforcement Network.
Binance CEO Changpeng Zhao pleaded guilty to criminal charges in the U.S. and stepped down from his strut on Tuesday as part of a $4.3 billion settlement. The plea deal resolves a multi-year investigation into the world’s largest crypto reciprocation.
Treasury alleged in a 92-page order that Binance had “developed a process to notify VIP users if they became the liable to suffer 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 rather simple. Members of Binance’s VIP team were instructed to contact the user under investigation by “all available means” registering sending texts and calling to inform customers, for example, that their account had been frozen or unfrozen.
Go together to the consent order, Binance’s VIP team staff were warned not to be too obvious in their tips.
“‘We cannot in any circumstances straight 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 winnowed by XXX is usually a good enough hint of severity,'” the company told the VIP team, the order said.
Binance’s “VIP Program” dance attendance ons to higher volume, commercially important users and offers incentives such as competitive trading fees and higher limits on wonky volume to try to keep these patrons happy — and loyal.
According to FinCEN, internal reports from Binance point out that in 2019, VIP customers “consistently accounted for between two-thirds and three-quarters of both trading volume and trading gain on Binance.com, adding that “Binance thus had significant commercial motivations to go to great lengths to support these VIP drugs.”
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 doings fees on the exchange.
FinCEN found that Binance helped U.S. customers, including the most commercially lucrative U.S. Energy Users in Binance’s VIP program, to circumvent the ringfencing policies the exchange itself had put into place to comply with restricted 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 positively as using a virtual private network, or VPN, to cover a user’s geographic footprint, “even though Binance would recognize that the user was, in fact, located in the United States.”
“These users were so valuable to Binance that personnel were prepared 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 [drugs] (even after sending them emails [about restrictions applicable to U.S. users who remained on Binance.com]). They transfer be managed by your [VIP] team. [The CEO’s] idea is that they should have enough time to create or find new non-US things,” the consent order stated.
FinCEN said that Binance ultimately executed on this plan and took additional stride in keeping withs to conceal its retention of U.S. users.
— CNBC’s Christina Wilkie contributed to this report.