In a striking revelation reported by Bloomberg, Binance, the world’s largest crypto exchange, discretely previewed its impending $4.3 billion settlement with US authorities to its VIP traders.
Behind Closed Doors: Binance’s VIPs Get Early Warning
This exclusive disclosure occurred in September, two months before the official settlement, during a private dinner in Singapore amidst a bustling nightlife district.
The private event, reserved for some of Binance’s most significant traders attending a conference, served as a platform to reassure that despite the looming legal storm, the crypto giant would emerge “resilient,” the report stated. This move to inform key players beforehand highlights the intricate relationship Binance maintained with its VIP customers.
Complementing Bloomberg’s report, CNBC shed light on the privileges extended to Binance’s VIP users. As per the U.S. Treasury’s Financial Crimes Enforcement Network, these select traders received notifications from Binance if they were under law enforcement scrutiny.
CNBC stated that this setup effectively positioned Binance as an informant for its high-tier clients, alerting them of any account changes due to legal investigations.
Binance’s CEO, Changpeng Zhao, stepped down following his guilty plea to criminal charges in the US, marking the conclusion of the multi-year investigation. The VIP team at Binance was reportedly instructed to subtly hint at such investigations to the concerned users without explicitly advising them to withdraw funds or evade legal scrutiny.
VIPs: A Crucial Part of Binance’s Revenue
According to FinCEN, Binance’s VIP customers significantly contributed to the platform’s trading volume and revenue, sometimes accounting for up to three-quarters of the total. Despite policies prohibiting US residents from trading on the platform, US users formed a substantial part of the VIP user base, sometimes generating as much as 20% of transaction fees.
To retain its US clientele, Binance reportedly encouraged users to modify Know Your Customer (KYC) documents and use VPNs despite knowing their actual location. VIP users, particularly the top 100, were given leeway and time to create or find non-US entities to continue trading, reflecting the lengths Binance went to support its valuable users.
The FinCEN report unveils Binance’s intricate strategies to maintain its VIP customer base while navigating legal challenges. This development poses critical questions about the ethical and regulatory practices of major crypto exchanges and their commitment to compliance amid growing scrutiny from global regulators.
Chart from Tradingview