The U.S. IRS Launches Investigation on Crypto Exchange Binance for Tax Sleuths and Money Laundering

In a major crackdown, the U.S. Internal Revenue Services (IRS) and the Justice Department has initiated a new investigation on the world’s biggest crypto exchange - Binance Holdings Ltd.

The investigation is reportedly concerning the money laundering and tax offences as the regulatory probe seeks to unearth more information regarding the Binance business. Since the probe is confidential, the people familiar with the matter denied to be name.

Binance spokeswoman Jessica Jung said that company won’t comment on specific matter or inquiries. However, in a email statement to Bloomberg, Jung added: We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion. We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.”

Blockchain forensics firm Chainalysis who works with the U.S. Federal agencies examined a few transactions on Binance and concluded that more funds tied to illicit and criminal activities have been flowing through the exchange in comparison to its peers.

The recent investigation into Binance following on this month’s cyber-attack against Colonial Pipeline Co. This led to severe fuel shortages across the Eastern U.S. The company had to pay the hackers a massive $5 million in ransom in untraceable cryptocurrency.

Regulators have been keeping a close eye on Binance’s operations. Earlier in March, the U.S. Commodities and Futures Trading Commission (CFTC) investigated Binance on whether it is allowing Americans to make illegal trades on the exchange.

On the other hand, Binance has taken several steps to work with the U.S. regulators. It has hired some of the top-profile people who have better understanding of the regulatory laws and worked in some of the key government positions previously. Earlier this month, Brian Brooks, the top banking regulator of the OCC during the Trump administration joined Binance.

The U.S. Justice Department is also stepping up its investigation to examine what steps Binance has taken to avoid illicit activities on the platform. A person familiar with the matter told Bloomberg that before the formation of Binance U.S. Americans were advised to use a VPN aka the Virtual Private Network.

However, Binance spokeswoman Jessica Jung denied these activities saying they have never encouraged Americans to use VPN and get around the rules. We have implemented strong access controls that have been tested via external audit and are under continuous review and evaluation by Binance to ensure that the appropriate restrictions are in place and are effective,” Jung said.