How does Binance help hackers, scammers, and drug dealers?

In September 2020, Lazarus, a North Korean hacker group attacked Eterbase, the Slovakia-based cryptocurrency exchange and stole the number virtual money worth $5.4 million. According to information from the Slovak national police, a few hours after the hack, the hacker group opened at least dozens of anonymous accounts on Binance to convert illegal assets and erase traces of money.

Hackers took less than 9 minutes to open an account at Binance authenticated with encrypted email addresses, then easily traded the stolen crypto.

“Binance has no idea who is transferring funds through their exchange” due to the anonymous nature of the accounts, said Eterbase co-founder Robert Auxt bitterly.

Eterbase’s irretrievably lost funds are only a small part of the black financial flows that flowed through Binance between 2017-2021.

A Reuters investigation found that Binance processed transactions totaling at least $2.35 billion related to cyberattacks, investment fraud, and drug trafficking. This data is based on court records, statements by law enforcement and data analysis blockchain.

In 2019 alone, Binance received more than $770 million in illicit funds, according to the conclusion of Chainalysis, a crypto-asset research firm hired by US authorities to track illegal cash flows.

With around 120 million users worldwide, the monthly transaction value on Binance can reach hundreds of billions of dollars. Meanwhile, despite the concerns of some senior leaders from 3 years ago regarding money laundering, it was not until August 2021 that this exchange added the requirement for customers to authenticate by paper. sheet.

The illegal money flowing through Binance accounts for only a small percentage of the total trading volume. However, policymakers and regulators in the US and Europe have warned that criminals are using technology for money laundering purposes.

Tools of the Underworld

According to data from Crystal Blockchain, an Amsterdam-based analytics firm, between 2017 and 2022, subjects on Hydra, the world’s largest drug-trafficking website, used Binance as a digital trading tool. payments worth $780 million.

Reuters reported that the crypto assets were transferred between multiple wallets before being transferred to Binance. For crypto companies, such “indirect” cash flows are a suspicious indicator of money laundering. The Financial Action Task Force (FATF) and the International Monetary Fund (IMF) said that money laundering criminals often use complex techniques and detours, creating confusing blockchain transactions to cover traces.

Hillman, a spokesperson for Binance, asserted that the company monitors transactions and assesses risks to “ensure any illicit funds are traced, frozen, and returned to their rightful owners.” , and is ready to coordinate with authorities to prevent criminal networks from using cryptocurrencies.

However, according to court documents, Binance once refused a request to investigate and freeze the account used to launder money in a civil case in the US in 2020.

In Germany, police informed, European criminal groups switched to using Binance from 2020 to convert part of the assets earned from investment frauds worth about $800 million.

Strategies to capture market share, despite everything

Zhao, aka CZ, founded Binance in Shanghai in 2017. Data from internal chat groups shows that Zhao proposes the company’s next growth strategy, “increasing market share at all costs.”

The highest priority is to ensure that Binance dominates the crypto market and crushes the competition of smaller companies. “Profits, sales, comfort… all of them are behind.”

At the beginning of March 2018, subjects on the world’s largest online black market, Hydra, discussed in forums that they should use Binance to make transactions, because this exchange provides anonymity for customers, Just an email address to sign up. Naturally, Binance became the “fastest and cheapest way” for illegal transactions.

Alexandra, a 24-year-old office manager in Moscow, started taking stimulants on Hydra in 2019 to deal with her bipolar disorder. She said a few friends on Hydra say that Binance is the safest way to pay for drug transactions.

With a defiant strategy to increase market share, the conditions for registering an account on Binance are quite simple. Some people even use fake personal information to open accounts. Alexandra posted a photo of her passport, but was never bothered by the exchange with payments. “It’s like buying chocolate in a store.”

Even according to internal chats between Binance employees, the company’s compliance team has at times approved the opening of accounts even for cases of invalid documents, such as a person using 3 copies of the photo. same bill at restaurant in India. In January 2019, Zhao had to call on other departments to help the compliance team check customer information due to the overwhelming number of customers.

Monero – absolute anonymous coin

For the past 5 years, Binance has also been allowing customers to buy and sell on its platform a digital coin called Monero, which features absolute anonymity. While Bitcoin transactions are saved on the public chain, Monero masks the digital addresses of the sender and receiver.

Monero has shown popularity among Binance customers. According to data from CoinMarketCap, by the end of May, the trading volume of this coin on the exchange has reached about 50 million USD/day.

Authorities in Europe and the US have warned that Monero’s anonymous identity makes it a potential tool for criminals to launder money. The US Department of Justice’s 2020 report said that the use of “anonymity-enhancing cryptocurrencies” like the one above “is a high-risk activity associated with criminal activity.” In fact, hackers also use Binance to convert assets into Monero.

According to Reuters, on the underground forums, there are many articles on how to use Monero to buy drugs. “XMR (Bitcoin for Monero) is essential for anyone who wants to buy drugs on the online black market,” one user wrote.

Vinh Ngo (According to Reuters)