The U.S. Department of Justice recently released a batch of documents related to Binance, which directly exposed the Department of Justice’s current strict and powerful regulatory measures on Binance.

Meanwhile, in the SEC’s ongoing enforcement action against Binance, the SEC has begun integrating facts from the DOJ’s plea agreement with Binance into the SEC’s current enforcement action against Binance and its founder Changpeng Zhao (CZ).

1. The public files of the plea agreement between the U.S. Department of Justice (DOJ) and Binance now include a large number of important attachments that have not been made public before

Among the newly disclosed information, the three most eye-catching documents are:

  • the “Statement of Facts” admitted by Binance (Exhibit A to the Plea Agreement);

  • “Commitment to Comply” (Attachment C to the Plea Agreement); and

  • Description of DOJ’s “Compliance Oversight” Role (Attachment D to the Plea Agreement)


The breadth and scope of the DOJ’s compliance oversight, combined with the oversight imposed by the U.S. Financial Crimes Enforcement Network (FinCEN) and Binance’s related compliance commitments, cannot be underestimated — in fact, this level of DOJ/FinCEN regulation of global financial firms is unprecedented.

For example, DOJ’s compliance commitment includes requirements for unprecedented levels of compliance, such as new procedures related to:

  • policies, procedures and internal controls;

  • Customer and third-party relationships; anti-circumvention controls;

  • Regular review; appropriate oversight and independence;

  • Training and mentoring; comprehensive reporting and investigation;

  • Enforcement and discipline; and monitoring, testing and auditing. Compliance commitment documents

Binance’s new list of compliance commitments is as detailed as a consulting firm’s wish list — and it will cost tens, if not hundreds, of millions of dollars to implement and enforce them.

Likewise, the DOJ’s compliance oversight mandate is so broad and comprehensive that the DOJ devotes 13 pages just to outlining Binance’s obligations.

The DOJ’s comprehensive involvement following the plea agreement is particularly noteworthy. DOJ supervisory duties and powers, and Binance’s obligations to that supervisory authority, will be overseen by the DOJ’s Criminal Division, Money Laundering and Asset Recovery Section; National Security Division; Foreign Intelligence and Export Control Section; and the U.S. Attorney’s Office for the Western District of Washington. This essentially encompasses all divisions within the DOJ that are capable of criminally prosecuting any form of financial fraud.

At the same time, the level of cooperation required of Binance cannot be underestimated. Binance must facilitate the Monitor’s access to the Company, documents, and resources and provide all information, documents, records, facilities, and employees as reasonably requested by the Monitor. Binance must also make its best efforts to provide the Monitor with access to the Company’s former employees, agents, intermediaries, consultants, representatives, distributors, licensors, contractors, suppliers, and joint venture partners.

In some cases, the Supervisor may even choose not to notify Binance of its findings. In fact, in some cases, the Supervisor must immediately report potential misconduct directly to the government, rather than to Binance. In the following cases, the Supervisor should report potential misconduct directly to the government, rather than to Binance, especially when the Supervisor is under the express terms of the Agreement, if the Supervisor believes that any potential misconduct has occurred that may constitute a criminal or regulatory violation, the Supervisor is obliged to report such misconduct to the government.

Assessment and Monitoring - Examining Binance’s compliance with the terms of the Consent Order, in particular the obligations set forth in Part VI, to reduce the risk of Binance’s recurring violations.

Effectiveness Evaluation - An examination of Binance’s compliance with the relevant provisions of the Bank Secrecy Act (BSA) and related implementing regulations applicable to money services businesses (MSBs), except for the ongoing reporting requirements for transactions occurring on or after the date of the Consent Order (i.e., this exception does not apply to reports Binance is required to submit pursuant to the Suspicious Activity Report Lookback (SAR Lookback) described in Part VI, Subsection C).

Management Commitment - Evaluate and monitor senior management’s commitment to and effectiveness of executing Binance’s AML and sanctions compliance programs.

Compliance Assessments - Monitoring Binance’s compliance with the terms of its settlement agreement with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), its consent order with the Commodity Futures Trading Commission (CFTC), and its plea agreement with the U.S. Department of Justice (collectively, the “Requirements”).

3. Binance is undergoing an unprecedented government-level comprehensive review

As required by the settlement agreement, Binance needs to provide the U.S. Department of Justice, the Financial Crimes Enforcement Network, and other financial regulatory and law enforcement agencies with instant access and audit rights for several years, making the company and its customers like undergoing a financial physical examination 24 hours a day, 365 days a year.

This multifaceted surveillance not only provides a valuable opportunity for law enforcement and regulatory investigation and litigation teams to continually uncover new incriminating evidence, but also gives other government agencies (especially the U.S. Securities and Exchange Commission, which is in a tense legal battle with Binance and its CEO Changpeng Zhao) the opportunity to contact regulators, request documents, conduct inquiries, and even use them as witnesses in court.

At the same time, regulators also provide FinCEN with a regular flow of information. FinCEN may pass this information on at its own discretion. Binance is facing unprecedented government-level scrutiny, the depth and scope of which are unprecedented.

According to the settlement agreement, Binance must provide the U.S. Department of Justice (DOJ), the Financial Crimes Enforcement Network (FinCEN), and various financial regulatory and law enforcement agencies with years of uninterrupted access, audits, inspections, and reviews. This means that the company and its customers will experience a continuous, 24/7, 365-year rigorous financial review.

At the same time, these multiple oversight mechanisms undoubtedly provide law enforcement and regulatory investigative and litigation teams with unique opportunities to continually uncover and exploit emerging, incriminating evidence.

During this process, there is no law prohibiting other government agencies (especially the Securities and Exchange Commission (SEC) which is still in a heated and active litigation with Binance and CZ) from contacting these monitors to ask questions, request documents, take testimony, and even present the monitors as witnesses in relevant judicial proceedings. At the same time, the monitors may also continue to provide information to FinCEN, which in turn provides the information to other government agencies at its discretion.

Indeed, FinCEN’s consent order appears to anticipate making referrals to law enforcement and regulatory agencies, stating: “These [various supervisory] reports are likely to include proprietary, financial, confidential, and competitive business information. Moreover, the disclosure of these reports could undermine supervisory objectives by discouraging cooperation or impeding ongoing or potential government investigations. Accordingly, for these reasons, the reports and their contents are intended to: (i) be used solely by FinCEN, the Office of Foreign Assets Control (OFAC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice; and (ii) remain non-public except as mutually agreed in writing, or as FinCEN, in its sole judgment, determines is necessary to further its duties and responsibilities, or as otherwise required by law.”

The reality is that neither Binance nor any other large cryptocurrency company (or indeed any financial company in the world) has ever gone through a government regulatory agreement as rigorous, robust, and comprehensive as the one Binance has been required to undergo by the U.S. Department of Justice (DOJ)/Financial Crimes Enforcement Network (FinCEN). The oversight that Binance has agreed to (and paid for) is like putting cameras on every member of a global criminal drug cartel and having that cartel pay for an experienced and well-qualified team of former and current government agents to monitor them 24/7.

I don’t think a secretive and opaque financial company like Binance can suddenly transform into a law-abiding, open, transparent, compliant, and government-friendly traditional financial company. Even facing an SEC audit is hard enough for Binance’s troubled infrastructure, let alone facing a DOJ/FinCEN audit — which is nearly impossible.

It may only be a matter of time before Binance’s entire plea deal collapses, resulting in additional charges against Binance, additional charges against CZ, and new charges against everyone else (partners, customers, joint ventures, collaborators, etc.) who was unduly associated with Binance’s criminal enterprise.