WASHINGTON - In February 2019, Binance Holdings’ then chief compliance officer Samuel Lim acknowledged that the cryptocurrency exchange was being used to funnel money to Hamas, saying to a colleague that terrorists normally sent “small sums”.
Hamas could “barely buy an AK47 with 600 bucks”, the colleague responded in a chat message, according to the US Commodity Futures Trading Commission’s (CFTC) March lawsuit against the world’s largest crypto exchange.
That apparently nonchalant attitude caught up with Binance and its chief executive officer Zhao Changpeng on Tuesday. In announcing US$4.3 billion (S$5.8 billion) in fines against the firm and a guilty plea by Zhao for failing to comply with anti-money laundering laws, the US government put Hamas and terrorist organisations front and centre. The broad settlement also resolves the CFTC suit.
“Binance enabled a range of illicit actors to transact freely on the platform,” the Treasury Department said in a statement that named Hamas, Al-Qaeda, Palestinian Islamic Jihad and the Islamic State in Iraq and Syria as terrorist organisations that received funds through the exchange.
Binance’s settlement and Zhao’s guilty plea come as Hamas is embroiled in a war with Israel, sparked by the group’s Oct 7 attacks that killed more than 1,200 people, with more than 200 others taken hostage. Israel responded by invading Gaza, where thousands more have been killed.
In a press conference, US Attorney-General Merrick Garland said Zhao “wilfully violated federal law that requires financial institutions to guard against money laundering and terrorist financing”.
Cavalier attitudes
According to the US government, Binance failed to report suspicious transactions with terrorists. As part of its settlement, the company will have to file those reports going forward and review past activity it should have disclosed.
“This will advance our criminal investigations into malicious cyber activity and terrorism fundraising, including the use of cryptocurrency exchanges to support groups such as Hamas,” Mr Garland said.
Treasury’s Financial Crimes Enforcement Network (FinCEN) will receive US$3.4 billion of the fines paid by Binance, while its Office of Foreign Assets Control will get US$968 million. The FinCEN fine is the largest in that bureau’s history.
A number of cryptocurrency entrepreneurs have expressed cavalier attitudes about terrorists or other bad actors using their platforms. BitMEX co-founders Arthur Hayes, Benjamin Delo and Samuel Reed in 2022 pleaded guilty to wilfully failing to implement anti-money laundering and customer identification policies at their crypto derivatives exchange.
Former Ethereum Foundation researcher Virgil Griffith was sentenced in 2022 to more than five years in prison for participating in a 2019 blockchain and cryptocurrency conference in North Korea.
At the conference, Griffith discussed how North Korean money might be converted into cryptocurrency as a way to evade sanctions.
Photos showed the researcher dressed in a North Korean-style uniform, standing in front of a whiteboard on which he drew a smiley face and wrote “No sanctions yay”. BLOOMBERG
