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Another money laundering case closes in on Binance, FTX Japan customers to be made whole again and Coinbase earnings reveal that revenue is down more than 75 percent year-on-year.
Binance, the world’s largest crypto exchange, has been named by US attorneys as a conduit for a money laundering and drug trafficking organisation that operated out of Mexico.
In a new complaint filed in the Eastern District of Michigan, seven Binance accounts are accused of using the exchange to conceal the proceeds of international drug trafficking sales.
The complaint alleges that the money laundering activities began in 2018 (at the latest) and continue up to the present.
These activities allegedly include the use of couriers who pick up bulk US currency obtained from drug trafficking sales and deposit this currency into bank accounts.
The deposited money is then converted into bitcoin or other cryptocurrency using Binance wallet addresses associated with the money laundering organisation.
In the complaint, seven wallet addresses are identified as such, each handling either bitcoin, ethereum or the Tether stablecoin (USDT).
In May 2022, the US Department of Justice (DOJ) seized an unspecified amount of cryptocurrency from each of these seven wallet addresses.
The DOJ has now ruled that the cryptocurrency should be forfeited to the US government, and has issued arrest warrants for those associated with the seven accounts.
“The Defendant Cryptocurrencies were seized from Binance accounts utilized by a Money Laundering Organization (MLO) based in Mexico to transmit the proceeds of international drug trafficking,” wrote US attorney Dawn Ison.
“The Binance accounts were also utilized to facilitate unlicensed money transmitting involving the United States through US dollar cash and cryptocurrency transactions.”
Although the names and suspected locations of the defendants are not specified, the complaint does state that at least one of the “financial accounts” involved in the alleged conspiracy is located in the Eastern District of Michigan.
The complaint is signed by Ison, assistant US attorney Gjon Juncaj and Jeremy Fitch, a special agent of the US Drug Enforcement Agency (DEA).
Binance secret bank account
The complaint brings more bad press for Binance, which has been hit by a range of both direct and indirect enforcement activity over the last two months.
Last week, in an exclusive story published by Reuters, Binance’s global business was accused of having “secret access” to a bank account belonging to its purportedly independent US business.
In 2021, according to bank records and company messages, the account was allegedly used to transfer more than $400m to crypto market-making firm Merit Peak.
Merit Peak was managed by Binance’s global CEO, Changpeng Zhao, and at the time it was providing market-making services to Binance US.
“The money transfers suggest that the global Binance exchange, which is not licensed to operate in the United States, controlled the finances of Binance US, despite maintaining that the American entity is entirely independent and operates as its ‘US partner’," Reuters stated.
Kimberly Soward, a spokesperson for Binance US, told the news agency that only Binance US employees have access to the bank account in question.
This conflicts with messages sent by former Binance US CEO Catherine Coley, however, who allegedly said at the time that she did not know where the funds were coming from or who was making the transfers.
According to the Wall Street Journal, the US Securities and Exchange Commission (SEC) is currently investigating the ties between Binance market makers and the US exchange.
Binance payments partnerships continue
Away from its regulator difficulties, this week Binance announced that it has launched a new pilot scheme in France in partnership with Ingenico, a global point of sale (POS) manufacturer.
Under the partnership, Binance Pay users can pay for items in-store via an Ingenico Axium POS terminal using more than 50 cryptocurrencies.
The pilot will begin at the Le Carlie and Miss Opéra stores in Paris only, but Binance said it intends to scale up the partnership to all European jurisdictions where it is currently regulated.
In Q2 this year, Binance and Ingenico said they will also pilot a crypto-to-fiat payment method for POS transactions, also using Binance Pay and Ingenico Axium.
FTX Japan re-opens withdrawals
In positive news for the crypto markets, this week FTX’s Japanese subsidiary announced that it has re-opened withdrawals from the exchange for all users.
In a company statement, FTX Japan said that withdrawals will be handled by Liquid, a Japanese crypto exchange that was acquired by FTX in 2022.
As of Tuesday (February 21), users of FTX Japan can withdraw either crypto or fiat currency by linking a Liquid account to their FTX Japan account.
In the meantime, the rest of the FTX Japan exchange will remain closed. “We will inform you about the resumption of other services of FTX Japan at a later time,” the company said.
Coinbase revenue collapses as crypto winter continues
Finally, a look at the latest quarterly earnings from Coinbase.
Following the collapse of FTX, Coinbase is now the world’s second largest crypto exchange by volume, and as the only publicly traded crypto exchange its earnings reports offer a rare insight into the financial health of the wider industry.
In Q4 last year, Coinbase’s net revenue dropped 76 percent year-on-year, falling from $2.5bn to $0.6bn. In full-year 2022, net revenue more than halved from $7.4bn in 2021 to $3.1bn.
On a quarter-on-quarter basis, Coinbase eked out a 5 percent net revenue gain, but this appears to be due almost entirely to higher returns from “interest income”.
During the year, the value of assets held by both retail and institutional customers continued to decline, with total assets under management (AUM) falling 71 percent in 2022 compared with 2021.
On the plus side, Coinbase credited itself for its cost saving activities during 2022 (which included cutting about 18 percent of staff) and its increased engagement with regulators and policymakers.
“In short, we are proud of our ability to execute, and position our business as a regulated and legitimate market leader,” the company wrote in a letter to shareholders.
“The journey ahead will have its challenges, but our grit, determination, and resolve have been strong for 10+ years and we are excited for the future.”
