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Binance flees Netherlands, faces ‘aggravated’ money laundering probe in France

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Binance is leaving the Netherlands after failing to win a license, while its French permit may be in trouble as prosecutors suspect ‘aggravated’ money laundering at the world’s largest digital assets exchange.

On Friday, Binance announced a ‘notice on changes of services in the Netherlands,’ as in there aren’t any services anymore, at least not for any customers not already registered with the exchange. As of July 17, existing customers will only be allowed to withdraw assets, with a full market withdrawal to follow at some unspecified date.

Binance’s announcement claimed that, despite its Herculean efforts at feigning a willingness to comply with local regulations, “unfortunately, this has not resulted in a [virtual asset service provider] registration in the Netherlands at this time.” Bloodied but unbroken, Binance vowed to keep “striving to obtain authorizations” that it has absolutely no intention of following to the letter should said authorizations ever be granted. Which they won’t.

Binance was fined €3.3 million ($3.6 million) by Dutch central bankers a year ago for offering services to local residents without registering with the De Nederlandsche Bank (DNB). Binance ignored repeated DNB warnings that it was operating illegally, a factor the DNB took into account when boosting the penalty above the €2 million ($2.18 million) baseline.

Binance’s Friday announcement claimed that it was “already compliant” with the EU anti-money laundering standards, citing its registrations in countries like France. However, this vaunted commitment to compliance in la république is under suspicion of being so much merde.

Le FUD

On Friday, the French daily Le Monde reported that the Paris Public Prosecutor’s Office had opened an investigation into Binance’s activities in the country as early as February 2022.

The French authorities told Le Monde that the probe “relates on the one hand to acts of illegal exercise of the function of digital asset service providers (PSAN), and on the other hand, acts of aggravated money laundering, through participation in investment operations, concealment, conversion, the latter being carried out by perpetrators of offenses having generated profits.”

While France has been fairly liberal in doling out PSAN registrations since the program was rolled out in 2019, Binance was its usually laggardly self, waiting until May 2022 to secure its diploma from the L’Autorité des Marchés Financiers (AMF). The Paris prosecutors are reportedly investigating Binance’s illegal marketing of its wares to French customers in the years prior to its registration.

Binance tweeted confirmation of “an on-site visit last week by the relevant authorities” but declined further comment beyond the laughable statement that “we abide by all laws in France, just as we do in every other market we operate.” (Um, the United StatesCanada, the United KingdomAustraliaGermanyIndiaNigeriaPakistan, the PhilippinesSingaporeSouth AfricaTurkeyUruguay, and many other jurisdictions would like a word.)

Binance boss Changpeng ‘CZ’ Zhao doubled down on the ‘this is fine’ mantra, tweeting that the prosecutorial visit occurred “a couple weeks ago” and that Binance wasn’t the only PSAN licensee to receive such a visit. CZ added that Binance’s French operation “continues to be our flagship center in Europe.” (Anyone seen a Parisian office park flying a Jolly Roger?)

Expansion by subtraction

Despite CZ’s assurances, Binance’s European footprint continues to shrink. The Cyprus Securities and Exchange Commission (CSEC) has received an application from Binance to deregister from the country’s list of crypto asset services providers (CASP). The announcement offered no explanation for the reasoning behind Binance’s decision.

It was only last year that Binance received its CASP registration, but the exchange now claims to be narrowing its European Union focus to “fewer regulated entities” ahead of next year’s implementation of the EU’s Markets in Crypto Assets (MiCA) regulations.

Cyprus has a well-deserved reputation for catering to Russians looking for banks that don’t ask too many questions, while Binance has an equally well-deserved reputation for catering to Russians looking for exchanges that don’t ask too many questions.

Binance’s withdrawal from Cyprus doesn’t necessarily mean a complete halt to Binance’s shady Russian dealings, but any changes likely won’t be welcomed by its shady Russian customers. That said, Binance.com found shady ways to keep its U.S. whales after claiming to have exited the U.S. market, so we suspect shady Russians won’t be left stranded for too long. (But if we were CZ, we’d stay away from open windows).

You got served

Sticking with Binance’s European operations, the Malta-based Binance Europe Services Limited was recently served with court documents in the £9.9 billion ($12.6 billion) collective proceedings order (class action lawsuit) filed last year by BSV Claims Ltd. The specifics of the service are scant at present, but more information is reportedly coming next week.

Binance was one of four exchanges—the others being BittyliciousKraken, and Shapeshift—accused of colluding in the mass delisting of the BSV token in 2019. The suit seeks redress on behalf of the estimated 240,000 BSV investors who suffered financial harm due to the downward pressure on BSV’s fiat price that followed the delistings. CZ got that delisting ball rolling by publicly threatening to delist BSV if Dr. Craig Wright didn’t back off his defamation suit against online crypto trolls who publicly accused Wright of fraud.

The rapidity with which the other exchanges mimicked CZ’s stance strongly suggested a coordinated and anti-competitive attack on BSV, a utility-focused blockchain that challenged the uselessness of the speculative tokens promoted so heavily by these exchanges.

Binance established its Malta subsidiary in 2018 and—as usual—heavily promoted its intention to get a Maltese operating license, along with promises to make it rain for good local causes. But two years later, the Malta Financial Services Authority poured cold water on Binance’s claims of desiring regulatory compliance.

One year after that, CZ’s highly publicized pledges of millions of euros to Maltese cancer charities were exposed as vaporware. Clearly, BSV Claims’ class action suit is about as close to ‘class’ as CZ’s ever gonna get.

Your withdrawal is important to us

Meanwhile, there was a late-Friday update on the negotiations between the U.S. Securities and Exchange Commission (SEC) and Binance’s U.S.-based exchange Binance.US regarding the SEC’s bid to freeze Binance.US assets.

The SEC filed 13 civil charges against Binance and CZ last week and wants to ensure that CZ can’t loot the Binance.US piggy bank and leave customers high and dry. While Binance.US was promoted as independent of the main Binance.com exchange, a host of evidence has demonstrated that CZ and his minions had ultimate control over the U.S. exchange’s bank accounts.

Friday’s deal requires Binance Holdings Limited to “repatriate to the United States, transfer to [Binance.US’s opco] BAM Trading, and confirm that BAM Trading maintains possession, custody, and control in the United States of all fiat currency and crypto assets” belonging to Binance.US customers. In other words, assets that Binance.US didn’t actually control.

Only U.S.-based staff will have access to the new keys to the digital wallets into which Binance.US customer assets will be repatriated. And while Binance.US will be able to park these assets with a U.S.-based third-party custodian, said custodian can’t have “any affiliation, agreement or other relationship” with Binance.com or CZ.

In what could prove a highly revelatory discovery process, Binance has also agreed to provide the SEC with details on U.S.-based and “potential U.S.” users who transacted via Binance.com accounts both before and after the exchange reluctantly imposed know your customer (KYC) requirements in 2021.

Predictably, both sides are declaring victory in this skirmish, with Binance.US claiming the deal will allow it to “continue our ordinary course business.” The SEC stated that the prohibitions agreed to in the deal are “essential to protecting investor assets” and ensuring that “U.S. customers are able to withdraw their assets” from Binance.US.

A growing number of Binance.US users had been reporting difficulties getting the exchange to process their withdrawal requests. Binance.US suspended U.S. dollar deposits following the SEC charges as banks grew skittish about associating with the scandal-tainted brand.

The SEC explicitly allowed the exchange to honor customer withdrawal requests while the asset negotiations were ongoing. But Binance.US warned customers that its ability to “process USD fiat withdrawals will be impacted” when it “pause[s] USD fiat channels as early as June 13.” Trouble is, many customers who submitted withdrawal requests well in advance of that deadline are still waiting to be reunited with their cash.

These problems weren’t likely improved by Friday’s not-all-that-surprising announcement by the Wyre payment processor that it was “winding down” operations—for good this time. The company claimed the shutdown was due to “market conditions” and not “any regulatory agency direction.” Customers are advised to withdraw assets from the platform by July 14.

Less than a month ago, Binance.US transferred $9.8 million in customer assets to Wyre from Nevada-based Prime Trust, which was/is dealing with its own fiscal challenges. Wyre’s chief compliance officer formerly performed a similar role at Binance.US, so yet another example of the incestuous Addams Family that runs ‘crypto’ doing a heckuva job.

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Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

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