French police are investigating Binance, the world’s largest cryptocurrency exchange, over allegations that it illegally advertised its services to consumers and did not carry out adequate checks to prevent money laundering.
An official in the Paris prosecutor’s office on Friday confirmed the existence of the inquiry that began in February 2022 and was first reported by Le Monde newspaper. “The materials and data collected in the search will now be studied in depth,” said the person.
The investigation comes after France, under President Emmanuel Macron, has sought to encourage tech start-ups and investments to Paris. Changpeng Zhao, Binance’s chief executive, met several French ministers and Macron himself as the company sought regulatory approval, and he promised to make Paris his European headquarters.
Prosecutors are investigating whether Binance advertised before it was recognised as a digital asset service provider in May last year by the Autorité des Marchés Financiers, the markets regulator.
“We abide by all laws in France, just as we do in every other market we operate,” said Binance.
Lawyers Baptiste Bonhomme and Étienne de Dreuille of Reinhart Marville Torre had in December filed a legal complaint against Binance on behalf of more than a dozen plaintiffs, alleging misleading commercial practices, illegal canvassing and fraud.
“French authorities have grasped the seriousness of this case,” Bonhomme told the Financial Times. “Several raids have been conducted.”
The AMF’s decision to register Binance in May contrasted with the reluctance of other European regulators to give the company a foothold. The UK’s Financial Conduct Authority in 2021 banned the trading platform from operating on its soil citing concerns about its lack of co-operation with regulators.
Honored to have dinner with (a few hundred people and) President Macron. @ Choose France 🇫🇷 pic.twitter.com/qQXWlTKBe5
— CZ 🔶 Binance (@cz_binance) July 11, 2022
Separately on Friday Binance said it would withdraw from the Netherlands after failing to get permission to register as a virtual service asset provider, which allows them to handle and trade crypto tokens.
Last year, the Dutch central bank fined Binance more than €3mn for offering services without proper registration. The bank added Binance benefited from a “competitive advantage” from not paying levies and skipping out on compliance costs.
Binance is also under heavy pressure in the US where the Securities and Exchange Commission this month filed civil charges against the exchange and Zhao. The regulator has alleged Binance operated unregistered exchanges, as well as misrepresented trading controls and oversight on its US platform.
The agency also accused Binance of mixing billions of dollars of customer cash with a separate trading firm owned by Zhao.
The lawsuit followed a case brought against Binance in March by the Commodity Futures Trading Commission, the US derivatives regulator, which accused Binance and Zhao of operating illegally in the US. It also alleged much of the exchange’s reported trading volume and profitability had come from “extensive solicitation of and access to” US customers.
Binance has said it would dispute both suits from US regulators. At the time Binance said it was disappointed and disheartened by the SEC complaint and called the CFTC lawsuit “unexpected and disappointing”.
French finance minister Bruno Le Maire told BFM Business in October that he was “proud” about attracting Binance and another big platform Crypto.com to France. Bringing in such foreign players and granting them registered status by the AMF was key to the country’s bid to become a “European hub of the crypto assets ecosystem”, he added.
Aurore Lalucq, a French member of European parliament who has been critical of France’s registration of Binance, said that it was time for French regulators to re-examine Binance’s status. “With the SEC filings and the French investigation, there are real questions over Binance’s reputation,” she said.
Additional reporting by Scott Chipolina in Amsterdam
