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Binance Sweating Amid Claims of Illegal BNB Sales and Illicit Transactions

In just 24 hours, Binance (BNB-USD) has gone on full red alert. Indeed, the exchange giant is facing a one-two punch of bearish catalysts. The first comes in the form of an Securities and Exchange Commission (SEC) probe surrounding the BNB coi…

In just 24 hours, Binance (BNB-USD) has gone on full red alert. Indeed, the exchange giant is facing a one-two punch of bearish catalysts. The first comes in the form of an Securities and Exchange Commission (SEC) probe surrounding the BNB coin. The second comes from a Reuters report on illicit transactions processed by Binance in its many years of crypto trade clearing.

The SEC’s probe is diving deep into the history of the world’s largest crypto exchange. It seeks to investigate whether Binance had broken any SEC regulations with the launch of its BNB coin five years ago.

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BNB — now the fifth-largest cryptocurrency in the world by market capitalization — is the official currency of Binance. Since its launch in June 2017, BNB has been serving as the native utility token for the exchange. Primarily, users tap BNB to pay transaction fees on the BNB Chain. Those who do pay in BNB-USD are charged lower fees. However, the coin can be used for all sorts of things, be it as a transactional currency or a DeFi tool.

According to the new investigation, the SEC has reasonable belief that Binance launched its BNB coin without making necessary registrations with the SEC. The probe stems from a similar line of thinking as its Ripple (XRP-USD) lawsuit. The SEC views BNB as a security, rather than a currency. And as such, it says Binance should have registered its initial coin offering (ICO) with the agency. The SEC will build evidence that BNB is a security by noting BNB’s initial coin distribution and incentives to evidence this claim.

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Reuters Alleges Binance Processed Billions in Illicit Funds

Adding to the many woes for Binance is a report by U.K. news agency Reuters. Published yesterday, the report makes some damning accusations of Binance’s role in the illegal aspects of the crypto market.

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Reuters’ report paints a damning picture of Binance’s role in the world of money laundering and illicit activity. Tapping blockchain security company Chainalysis, Reuters estimates in the article that Binance had processed $2.35 billion in dirty money between 2017 and 2021 alone.

It asserts that Binance is largely complicit in its role, not necessarily endorsing the transactions but not doing enough to stop them. It homes in on two specific major instances of criminals using Binance as an illegal money vehicle. The first evidences Binance’s role in fueling the darknet drug market Hydra. Hydra is a Russian platform, in which users buy different drugs and process transactions in cryptocurrency. The report claims Hydra has facilitated $5.2 billion in crypto trades since 2015. Much of this flows through Binance.

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The second major instance of Binance facilitating illegal transactions is through the Lazarus Group. Lazarus is a North Korean state-backed hacking outfit. It operates with the goal of stealing money to fund North Korea’s nuclear weapons program. Reuters’ piece, like many other outlets, link recent hacks to Lazarus, including the Ronin (RON-USD) chain hack that robbed the network of $600 million in March. The hackers used Binance to mix the stolen assets.

Binance is responding to the article with a blog post on its website. The exchange calls the article an example of “breathless pearl clutching.” It goes on to refute most claims made in Reuters’ piece, saying that it is full of “falsehoods” and “massive leaps to conclusions.” Moreover, Binance CEO Changpeng Zhao is taking to Twitter on the matter. He points readers to a lengthy Reddit thread, saying it sums up his feelings on the report.

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On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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