Binance’s $4.3 Billion Settlement Faces DOJ Scrutiny Over FTX Ties In Monitorship Decision

In recent developments, the US Department of Justice (DOJ) has been reevaluating its choice of law firm to oversee the cryptocurrency exchange Binance as an independent monitor. 

The decision concerns the firm’s previous work for the now-bankrupt FTX exchange. The monitorships were part of the $4.3 billion deal in which Binance pleaded guilty to violating US money-laundering regulations and trade sanctions. 

This development has prompted the DOJ to explore alternative options for the monitorship, while the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) intends to continue engaging with the law firm.

Binance Monitorship In Question 

According to a Bloomberg report, Sullivan & Cromwell was close to winning approval as an independent Binance monitor on behalf of the DOJ and FinCEN in February. However, subsequent criticism of the firm’s association with FTX raised concerns within the DOJ. 

According to insiders familiar with the matter, the agency is now reportedly reviewing other potential candidates for the coveted monitorship. The DOJ and a FinCEN spokesman declined to comment, and Sullivan & Cromwell did not respond to Bloomberg’s requests for comment.

Sullivan & Cromwell represented FTX before and after the exchange’s bankruptcy in November 2022. The firm played a significant role in tracking billions of dollars in assets across real estate portfolios, cryptocurrency wallets, and executives’ bank accounts to aid creditor recoveries. 

While Sullivan & Cromwell has billed over $170 million for its work in the bankruptcy proceedings, it has faced criticism for allegedly failing to detect the fraudulent activities perpetrated by FTX co-founder Sam Bankman-Fried.

Investigation Into Law Firm’s Work

Bankman-Fried, recently sentenced to 25 years in prison for embezzling billions of dollars from FTX customers, has attempted to shift blame onto Sullivan & Cromwell and other outside lawyers as part of his defense strategy. The law firm, however, maintains that its involvement with FTX was limited. 

The exchange’s new management has defended Sullivan & Cromwell, dismissing what they call a “false narrative” propagated by Bankman-Fried and others. In addition to legal challenges from FTX customers, an independent bankruptcy examiner is also investigating the law firm’s work for the exchange.

The ongoing debate surrounding Sullivan & Cromwell has caused delays in the selection process for a monitor to oversee Binance. Both the US government and Binance had initially committed to choosing a monitor within 60 business days following the plea agreement made on November 21. 

The monitor’s role is to ensure Binance’s compliance with the terms of the agreement and to gain access to internal records, facilities, and employees to report the company’s activities to the government. 

Binance has been tasked with identifying and reporting tens of thousands of previously missed alleged suspicious activity transactions.

Currently, the exchange’s native token, BNB, is trading at $537, reflecting a notable price decrease of nearly 7% compared to yesterday. Importantly, this decline in the token’s price has persisted over an extended period, with a recorded drop of 5.2% over the past thirty days.

Featured image from Shutterstock, chart from TradingView.com