Binance's VIP users were given special advantages, such as prior notification should they be the focus of a law enforcement inquiry, according to the Financial Crimes Enforcement Network of the U.S. Treasury. The Treasury's 92-page order stated that Binance had created a system to inform its VIP users in the event of a law enforcement investigation. On Tuesday, Binance CEO Changpeng Zhao pleaded guilty to criminal charges in the U.S. and relinquished his CEO role as part of a $4.3 billion resolution.
Binance's VIP users were entitled to a set of exclusive benefits, including being notified by the crypto exchange ahead of time if they were the subject of a law enforcement inquiry, according to the U.S. Treasury's Financial Crimes Enforcement Network. On Tuesday, Binance CEO Changpeng Zhao pleaded guilty to criminal charges and resigned following a $4.3 billion settlement that resolved a multi-year government investigation into the world’s largest crypto exchange.Treasury's 92-page order claimed that Binance had "established a process to alert VIP customers if they became the topic of an enforcement investigation," in a system where Binance functioned as a lookout for its top-tier clients.The mechanism, as detailed by FinCEN, was relatively straightforward. Members of Binance's VIP team were directed to get in touch with the user under investigation by "all available means" including sending messages and calling to let customers know, for instance, that their account had been unlocked or frozen.As per the consent order, Binance's VIP team personnel were warned to never be too obvious with their tips."'We can never, in any circumstances, directly tell the user to run/withdraw, since we could get sued or held personally liable. Giving a strong hint[,] such as your account is unlocked/your account has been investigated by XXX is usually a sufficient enough indicator of seriousness,'" the organization informed the VIP team, the order noted.Binance's "VIP Program" caters to higher volume, commercially important users and grants rewards such as competitive trading fees and higher limits on order volume in an effort to keep these patrons satisfied — and loyal.As per FinCEN, internal reports of Binance revealed that in 2019, VIP customers "consistently accounted for between two-thirds and three-quarters of both trading volume and trading revenue on Binance.com," further noting that "Binance thus had significant business incentives to go to great lengths to support these VIP users."In spite of rules that bar people in the U.S. from trading on the platform, users in the U.S. "formed a critical part of the VIP userbase," at some points accounting for as much as 20% of all transaction fees on the exchange. FinCEN discovered that Binance helped U.S. customers, including the most commercially valuable U.S. Enterprise Users in Binance's VIP program, to skirt the ringfencing policies the exchange itself had put into place to comply with regional laws.One such approach entailed convincing users to alter KYC documentation to give the improper notion they weren't located in the U.S., as well as using a VPN to mask the user's geographic presence, "even though Binance would understand that the customer was, in reality, situated in the United States.""These customers were so precious to Binance that personnel were instructed not to deactivate them," read the FinCEN report.In Dec. 2020, a member of Binance's VIP team stated, "We will not be restricting the top 100 [users] (even after sending them emails [about restrictions applicable to U.S. users who remained on Binance.com]). They will be overseen by your [VIP] team. [The CEO's] intention is that they should have enough time to set up or find new non-US entities," the consent order reported.FinCEN mentioned that Binance eventually followed through on this plan and took extra steps to conceal its maintenance of U.S. users.— CNBC's Christina Wilkie made a contribution to this report.
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