The Department of Justice’s Approach to Crypto Firms
Recent events involving Binance have ignited a debate about the US government’s crackdown on cryptocurrency companies. Omid Malekan, an adjunct professor at Columbia Business School, argues that the Department of Justice’s approach differs from what is seen in traditional finance.
Malekan points out that even companies that follow Anti-Money Laundering (AML) practices in the traditional financial system still process illicit funds. He believes that those who think crypto enables bad actors don’t understand how the rest of the financial system works.
“If they’d been held to the Binance Standard there’d be hundreds of managing directors in jail and less money for shareholder buybacks (or lobbying). But the bankers were smart enough to never question the game.”
Despite his criticism, Malekan acknowledges that Binance was wrong for lying to its customers and failing to comply with regulations. The exchange recently settled with the US government for allegedly facilitating the movement of stolen funds.
ICIJ Investigation into Money Laundering
Leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ) reveal that some of the world’s largest banks allowed criminals to launder trillions of dollars. The investigation, disclosed in September 2020, analyzed suspicious activity reports (SARs) involving over $2 trillion worth of transactions between 1999 and 2017.
The ICIJ coordinated a global investigation involving more than 400 journalists from 110 news organizations in 88 countries. Banks such as Bank of New York Mellon, Deutsche Bank, and HSBC were implicated in facilitating these potentially illicit transactions.
Hot Take: Wall Street vs Crypto
In comparing Binance’s treatment with traditional finance, Omid Malekan argues that many Wall Street executives would be behind bars if held to the same standard. He highlights the hypocrisy in how illicit funds processed by compliant financial firms are deemed acceptable as long as the necessary paperwork is done.
Malekan also acknowledges Binance’s contribution to financial inclusion, recognizing its success in onboarding millions of underprivileged individuals into the financial system. However, he emphasizes that Binance was still in the wrong for deceiving customers and failing to comply with regulations.
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