Binance’s VIP Users Given Special Privileges by the Exchange, According to US Treasury
The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has revealed that Binance’s VIP users were given exclusive privileges, including advance notice from the exchange if they were being investigated by law enforcement. The disclosure came as Binance CEO Changpeng Zhao pleaded guilty to criminal charges and stepped down as part of a $4.3 billion settlement. This settlement resolves a long-running investigation into the world’s largest cryptocurrency exchange.
FinCEN Allegations
In a 92-page order, FinCEN alleged that Binance had developed a process to inform its VIP users if they became the subject of a law enforcement inquiry. Binance effectively acted as a lookout for its top-tier customers, with members of its VIP team instructed to contact users under investigation through various means, such as texts and calls, to inform them of actions taken on their accounts. However, Binance cautioned its staff against being too obvious in their tips.
The “VIP Program”
Binance’s “VIP Program” caters to high-volume users and provides incentives like competitive trading fees and higher order volume limits to keep these important customers satisfied and loyal. FinCEN found that in 2019, VIP customers consistently accounted for the majority of trading volume and revenue on Binance.com. The report also highlighted that despite rules prohibiting US residents from trading on the platform, they represented a significant portion of Binance’s VIP user base.
Bypassing Compliance Policies
FinCEN discovered that Binance assisted US customers, including those in its VIP program, in circumventing the exchange’s ringfencing policies designed to comply with local laws. This included encouraging users to modify their know-your-customer documentation to falsely indicate they were not in the US and using virtual private networks (VPNs) to mask their geographic location, despite Binance being aware of their true location. The report stated that Binance personnel were instructed not to off-board these valuable users.
Hot Take: Binance’s VIP Privileges and Compliance Issues
The revelation that Binance’s VIP users received special treatment and were given advance notice of law enforcement investigations raises concerns about the exchange’s compliance practices. By acting as a lookout for its high-value customers, Binance may have compromised its integrity and facilitated potential illegal activities. Additionally, the assistance provided to US customers in circumventing compliance policies indicates a disregard for regulatory requirements. These revelations further highlight the need for robust oversight and regulation within the cryptocurrency industry to ensure transparency and protect against financial crimes.
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