The former SEC official believes that there’s a “litany of indicators” that Binance is about to be charged by the DOJ.
John Reed Stark, a former chief of the SEC Internet Enforcement division, claimed in a Sunday night tweet that the US Department of Justice will file, or has already filed, a Binance-related criminal indictment.
The opinion comes after the SEC sued Binance on June 5 for alleged violations of securities laws, resulting in Binance.US abruptly halting USD deposits.
Stark, who worked as an SEC official for 20 years and managed a number of US SEC-DOJ joint prosecutions, claims there exists “a litany of indicators” that a criminal indictment will be filed, or has already been filed under seal.
These include charges of money laundering, market manipulation and compliance control circumvention.
Before digging into the SEC complaint, Stark’s opinion briefly outlines the 76-page Commodities Trading and Futures Commission’s (CTFC) against Binance and its CEO, Changpeng Zhao.
The complaint accuses CZ and Binance of violating CFTC statutes and regulations, but it also implicates Binance’s former chief compliance officer, Samuel Lim.
Lim allegedly knew certain Binance customers “are here for crime”, and that he helped “friends/third parties” bypass compliance controls through informing them that VPNs would give US customers access to the main Binance platform.
Good to know
A virtual private network (VPN) is a secure connection that protects your online privacy and data. It encrypts your internet traffic, making it difficult for others to track your activities or intercept your information. It also allows you to bypass geographic restrictions and make it appear as though you’re in a different country.
Lim said in a July 2019 conversation that restricted customers “can use [a virtual private network] but we are not supposed to tell them that … it cannot come from us … but we can always inform our friends/third parties to post (not under the umbrella of Binance) hahah.”
Read more: Robinhood looking to delist cryptocurrencies named in recent SEC suits
The SEC on the other hand claims that CZ is “enriching himself”.
It’s expected that the more serious charges will be those related to money laundering. The 13 charges suit against Binance alleges that Zhao comingled billions of dollars in customers’ funds for his own benefit. He’s also accused of using a firm to inflate Binance’s value, causing extensive market manipulation.
The SEC is seeking to freeze the assets of Zhao-controlled entities and the funds held in Zhao’s offshore accounts to be brought back to the US.
Stark noted: “Like the CFTC action, the SEC also alleges that Zhao designed, implemented and engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
In January, Stark warned about an enforcement onslaught in the crypto sector just after the SEC charged Gemini and Genesis over their lending platform.
Stark also noted that the SEC is working with criminal prosecutors, FBI agents, and even whistleblowers. Though the SEC is yet to reveal solid information, it’s likely that the DOJ will be looking into the money laundering charges.
“My take is that U.S. DOJ is working with the SEC, CFTC and multiple informants/whistleblowers, and the next axe to fall is the filing, or unsealing of, Binance-related criminal charges,” Stark said.
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