Binance Enrolls Millions, Skips Paperwork, Says Columbia Professor

The Binance settlement, according to adjunct professor Omid Malekan of Columbia Business School, demonstrates the unclear handling of banks and cryptocurrency companies.

The United States’ crackdown on cryptocurrency businesses has sparked disagreement, and developments related to Binance have sparked significant debate about the future of cryptocurrency regulation.

Omid Malekan, an adjunct professor at CBS and author, noted the Department of Justice’s distinct attitude in this case. This approach differs significantly from its stance towards traditional finance.

“People who genuinely believe that crypto is some novel enabler of bad people being able to do bad things don’t understand how the rest of the financial system functions,” Malekan wrote on X (formerly Twitter), adding that companies that follow Anti-Money Laundering best practices still process large sums of illegal funds. “But that’s all considered OK because somebody did the paperwork.”

Some thoughts on the Binance settlement, with the preamble that I think companies that don’t like certain laws should still comply with them while campaigning for change.

One interpretation of the government’s suit and the resulting mammoth settlement is that by refusing to…

— Omid Malekan 🧙🏽‍♂️ (@malekanoms) November 22, 2023

Malekan also argued that many on Wall Street would be in jail if traditional firms were locally treated like Binance. The Binance Standard did not land hundreds of managing directors in jail.

This would result in less money available for shareholder buybacks or lobbying. But the bankers were smart enough never to question the game. But Malekan believes notwithstanding the criticism, the exchange was still “wrong to lie to its customers and wrong for not being compliant.”

Most recently, Binance and its co-founder Changpeng “C.Z.” Zhao reached a billionaire settlement with the U.S. government for allegedly allowing individuals engaged in illegal activities to move “stolen funds” through the exchange. C.Z. stepped down as CEO as part of the settlement.

Malekan also highlighted Binance’s recent contributions to financial inclusion:

“It did a reasonably decent job of onboarding tens of millions of poor, brown, and otherwise underprivileged people into the financial system, something the world’s compliant financial firms have chronically failed to do.”

ICIJ’s Global Money Laundering Inquiry

Leaked papers obtained by The International Consortium of Investigative Journalists suggest that individuals laundered billions of dollars. These illicit transactions reportedly flowed through the world’s largest banks.

In September 2020, authorities investigated over 2,100 suspicious activity reports (SARs) connected to transactions that exceeded more than $2 trillion between 1999 and 2017.

These reports were flagged by internal compliance officers of financial institutions, identifying potential instances of money laundering or criminal activity. Some major banks facilitating these transactions included the Bank of New York Mellon, Deutsche Bank, and HSBC.

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The ICIJ mobilized over 400 journalists from 110 news organizations in 88 countries. They conducted investigations and probed banks potentially involved in money laundering.