Blog > Law & Regulation

Binance: The Untrusted Intermediary

By Craig Wright | 02 Mar 2020 | Alternative Coins & Systems

Today, as I have done in the past, I set up a number of accounts with Binance based only on the verification of email addresses. As was the case with Liberty Reserve, which would then, in 2013, be shut down in accordance with anti-money laundering (AML) regulations, Binance requires a name, a date of birth, and an email address. None of it is verified at all. Binance provides you with a 24-hour withdrawal period giving you an allowance of up to 2 BTC in the time frame. I was previously able to, in one day, set up over 100 such accounts, none of which involved real names or addresses. Had I had more time, I could have set up more.

Doing so allowed me to take up to USD20,000 a day out of Binance, after washing it through various cryptocurrencies. With 100 accounts, it is possible to wash USD2 million a day through Binance without being noticed. For such services of money laundering, Binance will take a small commission.

Liberty Reserve founder Arthur Budovsky ran a digital currency empire built expressly to facilitate money laundering on a massive scale for criminals around the globe.

— Manhattan U.S. Attorney Preet Bharara on Liberty Reserve in 2014.

In deceiving and fraudulently promoting his money laundering service, the operator of the criminal shadow banking facility, Changpeng Zhao (CZ), promotes the idea of a non-existent concept; he tells the foolish people investing in his platform, and those seeking to benefit from wash trades with criminals as they avoid tax, that they are on a “decentralized exchange” or “DEX”.

The future look for Binance.com.

The reality is, a DEX is no different than the distributed laundering operation created by Liberty Reserve. CZ attempts to obfuscate the true nature of his system by calling it a distributed exchange. What they are really doing is running multiple servers in a manner that is designed to bypass regulatory controls. They have learnt from many of the mistakes of Liberty Reserve, but like all foolish criminals, CZ is greedy and wants more. As with all of such budding crime lords, so comes his downfall.

The Binance name has evolved to be more than just a company or just one centralized exchange. There are a number of regulated fiat-crypto exchanges using the Binance brand and technology, including Binance Singapore, Binance.US, Binance Jersey, etc. All of these are independently operated and fully compliant with their local regulations. There is, of course, the Binance.com global centralized exchange. And there is also a Binance DEX running on top of Binance Chain that’s maintained by a group of community developers.

At Binance, we strive to provide you with different choices and different levels of privacy. We don’t live in a perfect world. There are different compromises with each of the choices. It is important to understand the choices in front of us and the world we live in. I hope this article helps with that understanding.

We believe privacy is a fundamental right and are supportive of privacy driven initiatives.

As always, if you have any questions about Binance, feel free to tweet at me, and I will do my best to answer you. We strive to maintain open communication with our community.

Binance and CZ argue that they are seeking privacy. The reality is, they are seeking anonymity and the facilitation of crime. They want people who are not criminals, too, for without the innocent dupe, there would be no way to wash and launder money clean. In effect, Binance has become a giant commercial mixer. It takes a combination of clean money from foolish gamblers and those seeking to avoid tax and mix it with hardcore criminal funds. It is thus that CZ is attempting to create a digital currency empire, built with the express goal of facilitating crime. He seeks to enable money laundering on such massive scale that criminals around the world can operate with impunity.

For the same end, he lives out of a suitcase and changes his location every week. Such efforts to evade prosecution have meant taking his operations offshore and moving from country to country as he flees the encroaching regulation and runs away from it like a scurrying rat. He flees the inevitable, and for his brazen violations of global criminal regulations, he will eventually pay the piper. The problem is that many fools will have been caught in his web. When his criminal enterprise, an enterprise that is blazingly flaunting its efforts to facilitate crime, is finally closed, many innocent and foolish parties will be hurt.

The majority of money made through Binance comes from the proceeds of credit card theft, identity fraud, laundering money associated with extortion, and Ponzi investment schemes. Without Binance, many online cyberthieves, such as CryptoLocker coders, would not be able to sell their ill-gotten gains.

The primary reason that Binance exists lies in enabling account holders to convert their cash into digital currencies, wash it, and extract it without leaving a trace or trail. It would be simple to move from 100 manually activated accounts into an automated system where thousands of accounts could process not millions but tens of millions of US dollars daily.

Many of Binance’s clients are honest, which is what cyber criminals need. If it wasn’t for the fools seeking to get rich instantly with promises of Lamborghinis and unearned wealth, then there would not be enough volume to hide criminal funds. The volume of Binance’s malfeasance is underestimated. It was estimated that around USD1 billion had been washed through Binance last year. In reality, Binance alone accounts for money laundering in the order of USD2.1 billion or more annually. It is facilitated with a combination of over-the-counter trades, off-platform swaps, and illegal over-the-counter cryptocurrency brokers that are tied to terrorism and arms dealings.

Bitcoin Is Property

All cryptocurrencies are property, and are subject to law as property.

When you purchase coins (bitcoin) from Binance, and it is mixed with the criminal funds that have flowed through the same digital laundry, you are not buying bitcoin that you can own and call your own. There is a principle in law called the nemo dat rule, or, nemo dat quod non habet. It is the basic principle that a person who does not hold good title cannot confer it to another. Bitcoin is a divisible token and not an account. There are rules for mixing, which will apply to an extent, but when laundered through a criminal facility such as Binance, the ownership of the tokens can still be tracked and allocated to the original holders of the property rights.

So, when you buy from a criminal enterprise that is driven from one country to another time and time again as it flees the inevitable end, remember: you may not even own what you have purchased. The proceeds of crime are not something that you may hold good title to.

AML — Know Your Customer

Binance loves to say how it complies with know your customer (KYC) regulations, which is an absolute lie.

Binance is far less distributed than Liberty Reserve, and is, instead, controlled by a single mind. As much as they want to tell people that they have a blockchain and they are decentralised, multiple entities that are run by the same controlling mind are by definition centralised. Bitcoin was designed with a fixed and set protocol. If the protocol can be changed by individuals or developer groups (aka common law partnerships), then it is not in any way decentralised. Binance is not a decentralised exchange. It is a group of entities that form a collective criminal cartel. It is a criminal cartel run by one want-to-be mastermind, CZ. A man who skips jurisdictions faster than some people change their socks, fleeing the inevitable.

Like it or not, Bitcoin acts within law. No system of rules in society acts outside of law. Welcome to Bitcoin; it is not a system that allows for dark web markets and crime, but rather one that economically disincentivises them, by increasing the cost and adding a permanent record, allowing every malfeasor to be tracked.