Binance is back under US scrutiny

US federal prosecutors are investigating Binance over possible violations of American sanctions on Iran, according to Reuters, citing a person familiar with the matter.

The investigation is reportedly being led by prosecutors from the Southern District of New York together with the US Justice Department's criminal division.

The central question is whether Binance knowingly permitted transactions that breached US sanctions against Iran.

At this stage, it is an investigation.

Binance has not been charged with sanctions violations in connection with the reported probe.

$61 million tied to Iranian oil

The investigation comes shortly after US prosecutors filed a separate civil action seeking the forfeiture of approximately $61 million in cryptocurrency allegedly connected to sanctioned Iranian oil sales.

The Justice Department said two Chinese companies, Blessed Trust and Hexa Whale, used accounts at Binance to move proceeds from black-market sales of Iranian crude oil and petroleum products.

According to prosecutors, those funds were ultimately intended to benefit the Iranian government, its agents or proxies.

The DOJ's complaint describes Binance as the exchange used by the companies.

That civil forfeiture case does not by itself establish that Binance knowingly participated in the alleged scheme.

The key question is knowledge

That distinction is important.

Crypto exchanges can process transactions later linked to sanctioned entities without necessarily knowing the origin or destination of the funds at the time.

The reported criminal investigation is therefore focused on a much more serious issue: whether Binance knew prohibited activity was taking place and still allowed it to continue.

The DOJ complaint says Binance collects identity documents through its Know Your Customer program and maintains records of customer transactions, including wallet addresses, timestamps and transaction amounts.

Those records could become important in determining what Binance knew about particular accounts and when it knew it.

Binance says it has zero tolerance

Binance told Reuters that it maintains a zero-tolerance policy toward sanctions violations and continues to cooperate with law-enforcement agencies.

The exchange has not publicly confirmed the details of the reported investigation.

The new scrutiny comes at a sensitive moment for the company.

Binance only recently announced a $100 million investment in Circle and a five-year partnership designed to expand the use of USDC across its platform.

That deal positioned Binance as an increasingly important distribution partner for regulated dollar-backed stablecoins.

Now its compliance controls are again attracting attention from US authorities.

The $4.3 billion settlement still matters

The background makes this investigation particularly significant.

In 2023, Binance agreed to pay approximately $4.3 billion to resolve US investigations into anti-money-laundering, sanctions and compliance failures.

Founder Changpeng Zhao also pleaded guilty to failing to maintain an effective anti-money-laundering program and stepped down as CEO.

Reuters notes that Zhao was later pardoned by US President Donald Trump.

The settlement was supposed to mark a major reset in Binance's relationship with US regulators.

A fresh investigation involving sanctions compliance therefore raises the question of whether authorities believe problems persisted after that agreement or whether the conduct under review relates to an earlier period.

Reuters has not reported enough detail to answer that yet.

Crypto remains useful for sanctions enforcement

The case also shows why blockchain transactions can create both compliance problems and enforcement opportunities.

Crypto can move rapidly across borders and through multiple wallets.

But most major blockchains also leave permanent transaction histories.

That allows investigators to trace funds across addresses long after the original transfers occurred.

In the Iranian oil case, US authorities say they identified tens of millions of dollars in crypto allegedly connected to sanctions evasion and are now trying to seize it.

Why this matters

For Binance, the issue is not simply whether sanctioned money passed through its platform.

The bigger question is whether prosecutors can show that the exchange knew prohibited activity was occurring and failed to stop it.

That is a much higher bar.

But it is also exactly the kind of compliance issue Binance paid billions of dollars to resolve only a few years ago.

The investigation could therefore become another major test of whether the world's largest crypto exchange has successfully rebuilt its compliance systems after its historic US settlement.

For now, there is a probe, not a conviction.

What prosecutors discover about Binance's internal controls will determine whether this becomes another enforcement case or ends without charges.