U.S. Case Details Binance’s Knowledge About Criminal Users

For years, the Binance founder Changpeng Zhao and other senior employees at the cryptocurrency exchange knew that some of its users were criminals. Yet, despite regular warnings from some of its own employees that some transactions on Binance.com were violating anti-money-laundering laws, the firm was reluctant to cut them off.

Those allegations, which were made public on Tuesday in a sweeping federal case against Binance and Mr. Zhao, show how thoroughly he and his deputies understood that criminals were using their trading platform — and how little they did to stop them.

In many cases, they worked hard to keep the Financial Crimes Enforcement Network, an arm of the Treasury Department that fights money laundering and other illicit financial transactions, from learning about their most notorious users, according to a regulatory filing by FinCEN. Mr. Zhao and Binance pleaded guilty on Tuesday to violations of the Bank Secrecy Act and agreed to pay hefty fines.

In April 2019, representatives from a technology company working with Binance reached out to one of Mr. Zhao’s deputies to report that Hamas’s military wing, the Qassam Brigades, was fund-raising for what it described as “Palestinian resistance” by soliciting Bitcoin donations, and that it had received funds through transactions on Binance.com. The Binance official acknowledged the report, then tried to persuade the tech company’s representatives to downplay Binance’s role in the transactions, according to the filing, which FinCEN posted on its website on Tuesday.

In July 2020, another company working with Binance pointed out users on Binance.com, the trading platform, associated with Hamas as well as others from the Islamic State. A senior Binance employee acknowledged that these customers were “extremely dangerous for our company,” but told subordinates to check whether one of them was considered a V.I.P. — a user who did enough business on the exchange to warrant special treatment — before closing his account.

“Let him take his money and leave,” the employee wrote, according to the filing, “tell him that third-party compliance tools flagged him.”

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