Binance Operated Under 2 Entities to Avoid Scrutiny, WSJ Claims

Binance embarked on a plan to disarm U.S. authorities out of fear of prosecution, claims a new report by The Wall Street Journal. 

The paper alleges that Binance was prepared to defuse the risk of potential lawsuits through ‘two entities.’ The investigation is based on documents from 2018 to 2020 and interviews with former workers.

Creating 2 Separate Entities

WSJ noted that Binance planned to create a basic American platform called Binance.US that would use the former’s name and technology under license. In addition, it would present as a completely separate entity from Binance.com. The report claimed that the separation would protect the parent from the United States’ regulatory inspection. 

The investigation by the paper claims, “But Binance and Binance.US have been much more intertwined than the companies have disclosed, mixing staff and finances and sharing an affiliated entity…”

Therefore, the global exchange might fall under their jurisdiction if the U.S. authorities could prove this connection. Although a fifth of Binance.com’s customers were in the United States, the report alleges that the company primarily operated from hubs in China and Japan. It contended that this gave access to software codes or customer data from the U.S. to engineers outside.

Amid the ongoing probe, three U.S. Senators recently requested financial and compliance papers from the exchange’s top executives.

BeInCrypto previously reported that Changpeng Zhao and Brian Shroder were asked for the papers in order to defend the validity of Binance’s business strategy and practices.

Despite the division of company units, they contend that Binance.com owns Binance.US funds. They also allege that U.S. customers were held in the exchange’s holding company in the Cayman Islands. While the domestic entity is operating from San Francisco. According to reports, the Justice Department and the SEC have been probing this connection since 2020.

Media Trail Continues for Binance

This is not the first time mainstream media has targeted the world’s largest exchange. According to a ‘special report‘ by Reuters from 2022, Binance allegedly complied with the Russian government’s request to give it user information on Bitcoin donations linked to opposition leader Alexei Navalny.

Later in the same year, CEO Changpeng Zhao reacted to more explosive news. Reuters’ allegations ranged from how Binance became a “hub for hackers, fraudsters, and drug traffickers” to its “weak money-laundering checks.” An October report accused Changpeng Zhao of “plotting to dodge regulators in U.S. and U.K.”  

The same report also underlined that Binance.US was established as a de facto subsidiary in 2019. Whose purpose was to shield the global exchange from the attention of American authorities.

Following the allegations, the exchange’s top executive disputed them and retaliated against the media outlet in each past instance.