Cryptocurrency exchange Binance warned VIP clients about law enforcement surveillance

Binance CEO Changpeng Zhao has resigned as CEO of the crypto exchange as part of the settlement of a lawsuit filed by the US Department of Justice, and the crypto exchange will pay a $ 4.3 billion fine. A long-term investigation has revealed other interesting features of the largest cryptocurrency exchange. According to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), Binance singled out VIP users and provided them with enhanced services, such as notifying them that law enforcement agencies were interested in them.

FinCEN alleges that Binance helped US customers, including the most commercially profitable US corporate users, circumvent the ban policy that it had imposed to comply with local laws. Privileged US users were «the most important element of the VIP user base, «at some points accounting for up to 20% of all transaction fees on the exchange. «These users were so valuable to Binance that staff were instructed not to disconnect them,» the FinCEN report says.

Binance’s VIP program catered to large commercially important users by offering competitive trading fees and higher transaction volume limits. According to Binance’s internal reports, in 2019, VIP customers consistently accounted for 2/3 to ¾ of the trading volume and profits on the cryptocurrency exchange.

«We will not limit the top 100 users, even after sending them emails. They will be managed by a VIP team. The CEO’s idea is that they should have enough time to create or find new organizations outside the US,» said an internal Binance document from December 2020. FinCEN believes that the crypto exchange ultimately followed through with this plan and took additional steps to hide its work with US users.

The 92-page FinCEN investigation presents evidence that Binance «developed a process to notify VIP users if they became the subject of a law enforcement investigation.» Binance employees who serve VIP customers were supposed to contact the user under investigation «by all available means,» including sending text messages and making phone calls. At the same time, Binance employees were advised «not to give too obvious advice.»

VIP team members received the following instructions: «We cannot under any circumstances directly advise a user to hide or refuse our services, we could be sued. We should give strong hints, such as that the account is blocked or being investigated, which is usually a pretty good indication of the seriousness of the situation.»

According to FinCEN, Binance employees were also advised to alter documentation to give the false impression that the user was outside the United States and to use VPNs to mask the customer’s location «even if Binance knew the user was actually in the United States.»