The U.S. Department of Justice (DOJ) has chosen Forensic Risk Alliance (FRA) to monitor Binance‘s compliance with anti-money laundering laws and trade sanctions, as part of a plea deal following allegations against the cryptocurrency exchange for breaching financial regulations.
FRA was selected over other prominent candidates, including the well-known Wall Street law firm Sullivan & Cromwell, according to Bloomberg.
Under the terms of the plea agreement, Binance must undergo a three-year monitorship period.
This requires allowing FRA unrestricted access to its internal records, facilities, and personnel to verify compliance with regulatory standards.
FRA’s selection reflects its reputation and experience in handling corruption and fraud investigations, positioning it well to ensure Binance’s adherence to the required legal frameworks.
The role of independent monitors like FRA has become increasingly critical in the cryptocurrency sector, which is facing heightened regulatory scrutiny.
Originally seen as a leading candidate, Sullivan & Cromwell’s chances were diminished by its prior involvement with FTX, a competitor of Binance.
The law firm’s role prior to FTX’s bankruptcy and its efforts in the subsequent recovery phase raised questions about its impartiality.
Furthermore, accusations of failing to identify fraudulent activities at FTX adversely affected its reputation, leading the DOJ to seek alternatives.
The enforcement of stringent regulatory oversight in the crypto industry is highlighted by Binance’s commitment to a costly monitorship and substantial penalties.
FRA’s involvement indicates a move towards more rigorous regulatory compliance, underlining the evolving landscape of cryptocurrency regulation.
This regulatory intensification coincided with the Securities and Exchange Commission (SEC) suing Binance and its former CEO, Changpeng Zhao, for alleged securities law violations in June 2023.
Binance has contested the SEC’s actions, arguing procedural flaws and questioning the pertinence of the DOJ’s agreement to the SEC’s claims.
Additionally, due to concerns over potential extradition and flight risks, a U.S. federal judge has restricted Zhao’s travel, limiting him to the UAE despite his agreement to a substantial $175 million bond.
Zhao has since been sentenced to four months in prison.