An investigation by Reuters is accusing Binance, the world’s largest crypto exchange, of enabling illicit transactions totalling $2.35 billion between 2017 and 2021.
The investigation is pointing at the exchange’s lax registration rules, in particular, its support for anonymity as enabling several types of illegal activity including:
- Investment frauds
- Illegal drug sales
In one example of illicit activity, Reuters says that Lazarus, a North Korean hacking group, broke into a Slovakian exchange and stole $5.4 million worth of crypto, before proceeding to Binance to open ‘at least two dozen’ anonymous accounts which the group used to convert the stolen crypto to other assets.
Reuters also said it reviewed data which showed that from 2017 to 2022, buyers and sellers on the world’s largest darknet drugs market, a Russian-language site called Hydra, used Binance to make and receive crypto payments worth $780 million.
Hydra Market, which was considered to be the world’s largest and oldest darknet marketplace of illegal items and services, was seized and shut down by German authorities in coordination with U.S. law enforcement in April 2022.
The darknet, or dark web, is the collection of websites hidden from normal search engines and web browsers, with users accessing it with browsers that hide their identities.
According to the Reuters report:
“In Germany, police said investigators began seeing criminals in Europe turn to Binance in 2020 to launder some of the proceeds from investment fraud schemes that caused victims, many of them pensioners, to lose in total 750 million euros ($800 million).
The criminals’ use of Binance has not been previously reported.”
The investigation also says that Monero, a cryptocurrency that offers users anonymity by obscuring the digital addresses of senders and receivers, is being used on several darknet forums that Reuters reviewed where over 20 users wrote about buying Monero on Binance to purchase illegal drugs.
According to the report:
“Separately, crypto researcher, Chainalysis, hired by U.S. government agencies to track illegal flows, concluded in a 2020 report that Binance received criminal funds totalling $770 million in 2019 alone, more than any other crypto exchange.”
The news organization says they arrived at the $2.5 billion figure from an examination of court records, statements by law enforcement and blockchain data, compiled for the news agency by two blockchain analysis firms. Moreover, ‘two industry experts reviewed the calculation and agreed with the estimate.’
However, Binance has said it does not consider Reuters’ calculation to be accurate and told Reuters that it was seeking to further improve their ability to detect illegal crypto activity on the exchange.
You can read the full investigation here.