Reuters' Angus Berwick, Tom Wilson Launch Assault on Binance

Reuters’ Angus Berwick and Tom Wilson launched a new offensive against Binance on Tuesday, claiming the exchange failed to seize illicit funds on its platform.

The reporters cited Russia’s darknet marketplace Hydra and North Korea’s Lazarus group as their chief examples. Lazarus was the state-backed group that used hacked private keys to attack Axie Infinity in April, absconding with 173,600 Ethereum and 25.5 million USD Coins — a value of more than $600 million at the time. The group also hacked Slovakian crypto exchange Eterbase in 2020, taking $5.4 million in that incident.

After the 2020 hack, Reuters said, the hackers “opened at least two dozen anonymous accounts on Binance …. enabling them to convert the stolen funds and obscure the money trail.” Binance, meanwhile, disclosed to the authors that it had intercepted an unspecified amount of money stemming from the Axie incident.

It goes without saying that Binance has insight into precisely which funds were exchanged and and where they were sent, so it is not clear what information was obscured. Reuters did not elaborate, and did not respond to a request for comment from Goblin Crypto.

The reporting duo was similarly vague in describing the connection between Hydra and Binance. “After it was set up in 2015, Hydra distributed narcotics on behalf of drug dealers, all priced in bitcoin, to millions of buyers, mostly in Russia,” the authors noted. They also said an unspecified number of “users” recommended on the website’s forums “that buyers use Binance to make purchases, citing the anonymity Binance afforded its clients at the time by allowing them to register with just an email address.”

Binance began requiring customers to provide government-issued IDs in August 2021. Many centralized exchanges (CEXs), such as KuCoin, still give users the option to purchase cryptocurrencies without an ID, along with a majority of decentralized exchanges (DEXs), including the DeFi Kingdom platform powered by Ramp. (Still, users seeking to spend their money on illicit activities tend to move their money outside centralized exchanges — or opt for cash.)

In sum, Reuters said, $2.35 billion in illicit funding touched Binance in some manner between 2017 and 2021. They said some of the money was withdrawn to bank accounts created with fake or stolen information — meaning the perpetrators tricked their banks as well as Binance.

Binance disputed the reporters’ conclusions in a blog post published a week earlier, shortly after Reuters contacted the company. “Recently, a journalist reached out and claimed to have evidence that Binance enabled the laundering of some $2.5 billion between 2017 and 2022,” Binance noted in the post. “However, it’s clear that this journalist simply doesn’t understand the data nor how blockchain works.”

“KYC [know-your-customer rules] is stringent in the industry and it’s simply much easier to open a bank account with fake identification documents at a small local or regional bank,” the company added. “Two, you simply cannot move large sums of money into crypto without people noticing, and three, it is trackable. Even most so-called ‘privacy coins’ are much more transparent and easier to trace than traditional cash.”

After detailing steps Binance had taken to work with law enforcement in each of the cases Reuters cited, the company concluded, “We also believe strongly in the benefits of a strong, unbiased and independent media ecosystem and we hope that these publications continue to hold up the highest standards of journalistic integrity, and not be unduly influenced by those with an agenda.”

Binance-Hating Duo

It isn’t the first time that Berwick and Wilson have taken aim at Binance. The pair claimed in an April story the exchange had complied with a request by the Russian government to provide names and addresses of bitcoin donations associated with opposition leader Alexei Navalny, a political prisoner of Vladimir Putin’s regime.

Navalny’s chief of staff, Leonid Volkov, said at the time he was skeptical of the report. “I believe Reuters was wrong,” Volkov said. “There are also multiple inconsistencies in the article.” One of the inconsistencies he cited was the fact that Binance did not require users to identify themselves in April 2021, during the time in question — as Berwick and Wilson correctly noted (and ironically complained about) in their post this week.

Binance said in response to the April article that it would file a “formal complaint” with Reuters “under their own editorial code,” saying the reporters were guilty of “misleading” their readers in order to “hype or sensationalize” their material.

“Allegations should not be portrayed as fact,” the company added at the time. “Charges should not be conveyed as a sign of guilt. We have a duty of fairness to give the subjects of such stories the opportunity to put their side.”