US Department Of Justice (DoJ) Weighing Options Besides An Indictment Against Binance Explained

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Officials Are ‘Considering Fraud Charges’ But Are Weighing Concerns Related To Consumer Harm

Federal prosecutors, according to ‘people familiar with the matter,’ are concerned that an indictment against Binance could result in mass withdrawals from Binance. This could lead to a solvency crisis similar to that of FTX, resulting in consumer losses and a volatility in the crypto market, the sources told Semafor. Prosecutors are considering alternatives such as fines and deferred or non-prosecution agreements.

Various media outlets have reported extensively about the legal scrutiny faced by Binance ahead of SEC and CFTC civil charges against the venue, in June and March, respectively. For example, Reuters reported in December 2022 that DoJ prosecutors were delaying concluding a criminal investigation of the venue over a lack of consensus on whether to press charges. Reuters reported potential charges could be related to unlicensed money transmission, money laundering conspiracy and criminal sanctions violations. Binance attorneys are reported to have held meetings with DoJ officials, and argued that a criminal prosecution could have adverse effects on the crypto market. Binance executives, according to Reuters, are also the subject of the investigation which began in 2018.

Binance has recently had mixed results in obtaining international licenses. For instance, last week Binance withdrew its application for a business license in Germany. In June, Binance revealed it would be exiting the Dutch market after failing to obtain regulatory approval from local regulators. However, this week Binance announced becoming ‘the first exchange in the world to secure an Operational MVP License from Dubai's Virtual Assets Regulatory Authority (VARA).’

Takeaway: Binance has continued to operate normally since the CFTC and SEC civil charges against it. Nevertheless, criminal charges against the venue, including executives, would represent a new legal challenge for Binance. At the same time, prosecutors' consideration of alternatives to prosecution suggest officials are considering more tactful approaches where Binance may be offered a viable pathway towards compliance.