U.S. Treasury: Binance offers special privileges to VIP users, being investigated by law enforcement agencies can be notified first

CNBC reported that the U.S. Treasury Department has accused Binance of providing privileges to its VIP customers, including advance notice of law enforcement investigations and assisting U.S. users in evading its laws to continue providing services to them. It is reported that VIP users account for over 60% of Binance's overall trading volume and operational revenue, hence receiving special treatment.

U.S. Department of the Treasury: Binance VIPs Will Be Notified if Under Investigation

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury stated in a 92-page order that Binance has established a unique process for its VIP users to notify them if they are the subject of law enforcement investigations, claiming that this is essentially acting as a lookout for its top clients.

It is understood that Binance has a dedicated VIP team, whose employees are instructed to inform users under investigation through any means, including email or phone calls.

The order revealed that employees of Binance's VIP team were warned not to use overly obvious hints to avoid legal implications:

Under no circumstances can we directly tell the user to run or withdraw, otherwise we may be prosecuted or blamed; but we can give a stronger hint, such as "your account has been frozen" or "your account is under investigation by a certain unit," which is usually a serious enough hint.

Binance Illegally Continues to Serve U.S. VIP Users

The order also found that Binance assisted U.S. users in circumventing its isolation policies established to comply with local laws, including encouraging users to alter "KYC" documents to disguise non-U.S. identities and using Virtual Private Networks (VPNs) to mask their geographical locations.

FinCEN stated that Binance knowingly and willfully operated illegally in the U.S. and intentionally concealed financial transactions with its U.S. VIP clients.

Additionally, it mentioned Binance's VIP program, where they offer discounted trading fees and higher order limits to users with larger trading volumes and significant business relationships, who play a crucial role in Binance's trading volume and operational revenue.

The order indicated that VIP clients accounted for two-thirds to three-quarters of Binance's trading volume and operational revenue in 2019, and despite U.S. users being prohibited from trading on the platform, they still constitute a key part of the VIP users, sometimes even making up 20% of all trading volume.

FinCEN commented:

These users are very valuable to Binance, to the extent that employees were instructed to try to retain them. At the same time, they adopted many strategies to conceal the fact that they were continuing to serve U.S. users.

Binance Founder CZ Steps Down, Fined $4.3 Billion

Earlier reports indicated that Binance founder Changpeng Zhao (CZ) pleaded guilty in lawsuits with the Commodity Futures Trading Commission (CFTC) and the U.S. Department of the Treasury, agreeing to pay a $4.3 billion fine and resign from his position, with former Regional Market Head Richard Teng taking over as CEO.

Currently, CZ has completed the bail process, and the sentencing hearing is expected to take place on February 23, 2024.