U.S. Department of Justice appoints FRA as Binance regulator

The U.S. Department of Justice (DOJ) designated Forensic Risk Alliance (FRA) as Binance’s external regulator after Binance pleaded guilty to violating U.S. money laundering regulations and trade sanctions.

FRA was chosen over Wall Street law firm Sullivan & Cromwell and several other major contenders because of the confidential nature of the matter, according to the sources, who requested anonymity.

To date, the U.S. Department of Justice, law firm Sullivan & Cromwell and Forensic Risk A spokesperson for Alliance (FRA) had no immediate comment on the matter. Binance had already agreed to the request to designate an external monitoring agency in its plea agreement in November last year. As part of the agreement, Binance, the world's largest cryptocurrency trading platform, agreed to pay a $4.3 billion fine. At the same time, Binance founder Changpeng Zhao also admitted his crime and agreed to resign as CEO. He was sentenced to four months in prison on April 30.

The Forensic Risk Alliance (FRA) is tasked with ensuring that Binance complies with the terms of its plea agreement. To this end, FRA will have access to Binance’s internal documents, facilities, and employees with the purpose of monitoring Binance’s conduct and reporting to the government. FRA is recognized for its expertise in handling corruption, fraud investigations and compliance, having previously served in an advisory role to commodities trading firm Gunvor SA in its $660 million settlement with the U.S. Department of Justice over overseas bribery charges.

Law firm Sullivan & Cromwell was initially considered the best choice to serve as Binance’s external regulator, but encountered challenges due to its association with FTX. Sullivan & Cromwell provided legal services to FTX prior to its bankruptcy declaration in November 2022 and continued to serve as FTX's primary outside legal counsel following its bankruptcy. This relationship has raised some concerns, especially in the wake of FTX’s collapse, when issues of transparency and conflict regarding its internal management and legal advisory role came to the forefront.

In addition, some FTX investors and stakeholders have expressed doubts about Sullivan & Cromwell’s role in FTX’s bankruptcy, arguing that the firm may have failed to fully disclose its relationship with FTX, which may have affected its role as a Binance regulator. candidacy.

Law firm Sullivan & Cromwell has come under fire from critics, including investors who suffered financial losses in the FTX collapse, for failing to expose FTX co-founder Sam Bankman-Fried Fraud. Despite the criticism, FTX's new management defended Sullivan & Cromwell and praised their efforts in the recovery effort.

Despite the controversy and continued questioning, Sullivan & Cromwell has received some recognition for its legal services following FTX's bankruptcy. In addition, FTX also pointed out that without the efforts of a team of professional advisors, including Sullivan & Cromwell, more funds may have been lost or stolen, and customer compensation would have been far lower than currently expected levels.

FTX this week announced a bankruptcy compensation plan, under which FTX will fully compensate customers for losses suffered due to bankruptcy, plus interest. Specifically, FTX said that once all asset sales are completed, the company will have between $14.5 billion and $16.3 billion in funds available, and FTX currently owes approximately $11 billion to customers and other non-governmental creditors.

Although the law firm Sullivan & Cromwell was not selected as Binance’s external monitor, it is expected to obtain separate oversight of Binance on behalf of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for a period of five years. The role will involve identifying and reporting tens of thousands of suspicious activity transactions that Binance has been accused of overlooking by the U.S. Treasury Department in the past.

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