Binance is facing various allegations from the US Commodities and Futures Trade Commission (CFTC) that point to wrongdoing among the company’s executives.
Binance used Signal’s automatic removal feature
On March 27, the CFTC filed a lawsuit against leading crypto exchange Binance. While his accusations primarily suggest that Binance broke regulations to serve US-based customers, these allegations also outline other improper actions.
Notably, the CFTC pointed to the fact that Binance executives used the Signal messaging app to communicate. He added that the app’s auto-delete feature allows executives to delete chat records of incriminating activity.
The regulator alleged that Binance used Signal to communicate internally and with customers. Specifically, the CFTC said discussions of US restrictions were conducted on Signal – a practice “mandated” by Binance CEO Changpeng Zhao, according to former Binance compliance officer Samuel Lim.
The compliance officer was aware of the illegal use
The CFTC also highlighted Binance’s ties to illegal activities.
Specifically, the CFTC stated that Binance had received information about transactions related to the Islamic terrorist group Hamas around February 2019. Shortly after, Lim acknowledged the fact, stating in a message that terrorist groups often send “small sums” because larger sums are considered to be money laundering.
In 2020, Lim commented on Russian and other user funds, saying, “Come on…they’re here for the crime.” Another executive said, “we see evil, but we close (two) eyes.”
Lim further allowed a client whose transactions were related to illegal activity to continue using Binance with a new account. Elsewhere, Lim discouraged closing high-risk accounts, saying “Offboarding = bad in the eyes of (Changpeng Zhao).”
Binance explained to users how to use VPNs
Another section of the CFTC filing suggests that Binance instructed customers on how to circumvent its geofencing measures by using a virtual private network (VPN).
Binance stopped serving US customers in 2019, but released a VPN guide soon after. Although the guide was removed, the CFTC said a section of the page informed users that VPNs can be used to “unlock restricted sites.”
The advice was apparently deliberate: in the chat logs, Lim said that Changpeng Zhao wanted users to know how to use a VPN to access Binance. He also suggested that third parties could tell users to access VPNs, even if Binance itself couldn’t.
Lim acknowledged in another conversation that changing a user’s status from US to non-US is a fraud, but said Binance may encourage users to use a non-KYC account or VPN.
Binance contradicted those claims in a statement today, saying it blocks US customers based on their mobile service provider, credit card location, and KYC data — not just their address. IP, which is the only block a VPN would bypass.
Binance has also addressed employee trading on its own platform, but has yet to address most CFTC concerns.