DOJ Taps Forensic Risk Alliance to Oversee Binance Compliance

Forensic Risk Alliance (FRA), a London-based consulting business, has been chosen by the US Department of Justice (DOJ) to keep an eye on Binance, the largest cryptocurrency exchange in the world, for the next three years. This decision was made following Binance’s guilty admission to accusations of breaking trade sanctions and anti-money laundering (AML) laws.

The DOJ and Binance reached a broader settlement in November 2023, including the FRA appointment. As part of the agreement, Binance agreed to pay a hefty $4.3 billion fee. In addition, it has been reported that Changpeng Zhao, better known as CZ, the CEO of Binance, resigned from his role and was sentenced to four months in prison. 

According to reports, the DOJ preferred FRA over rivals, including Sullivan & Cromwell, a well-known Wall Street legal firm. There are conjectures that this decision was made due to worries about Sullivan & Cromwell’s role in the most recent bankruptcy of FTX.

We asked @TheJusticeDept and Judge Kaplan to hold co-conspirators accountable at SBF’s sentencing

Sullivan and Cromwell were the lead to monitor Binance

DOJ has now picked Forensic Risk Alliance to monitor Binance

Well done to every FTX customer for all the victim impact… pic.twitter.com/DuDjaAr8F3

— Sunil (FTX Creditor Champion) (@sunil_trades) May 10, 2024

As part of its responsibilities, FRA will thoroughly examine Binance’s internal controls, which include personnel behavior, facilities, and financial documentation. The aim is to ensure Binance complies with US laws and averts further infractions. This monitoring is essential because criminals might use weak AML procedures to launder money and carry out other illegal activities.

Binance Begins Three-Year Surveillance 

Binance has agreed to be subject to a three-year monitorship as part of the plea deal. FRA must be allowed access to internal documents, facilities, and staff to guarantee compliance with regulatory requirements. FRA’s proficiency in investigating fraud and corruption makes the company well-suited to carry out its monitoring responsibilities.

This development emphasizes how closely significant participants in the Bitcoin space are scrutinized and how important independent monitors are to preserving compliance. Once seen as a front-runner for this position, Sullivan & Cromwell encountered difficulties because of its affiliation with FTX, a previous rival of Binance. 

Due to the firm’s connection with FTX, especially before its bankruptcy and the following efforts to recover, questions were raised about its capacity to offer unbiased supervision. Sullivan & Cromwell’s image was further damaged by allegations that they failed to identify fraudulent actions during FTX’s collapse, which led the DOJ to choose a different monitor.

These are a few unanswered questions:

• To what extent will FRA’s oversight be able to stop problems at Binance in the future?
• Will this nomination lead to more stringent regulation of other bitcoin exchanges?
• What effect will this development have on the bitcoin industry as a whole?

The course of this scenario is unknown at this time. One thing is for sure, though: Binance is in the public eye, and to advance, the exchange must show that it is committed to compliance.