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A US senator has urged the Department of Justice (DOJ) to reach a decision on potential criminal charges against Binance and Tether for sanctions evasion and terrorist financing offences.
Senator Cynthia Lummis (R-WY) has written to US Attorney General Merrick Garland seeking action against the two crypto titans, following Hamas attacks on Israel that began earlier this month.
Citing “shocking reports” on terrorist use of the two platforms, Lummis said that Binance and Tether have facilitated “significant” illicit finance activity over the last two years.
“Based on this alarming information, we urge you and the DOJ to reach a charging decision on Binance that reflects their level of culpability and expeditiously conclude your investigations into the ongoing illicit activities involving Tether,” she said.
Lummis, who is known as one of the most crypto-friendly lawmakers on Capitol Hill, said that blockchain and crypto-assets have the potential to drive “responsible innovation” in US financial markets.
However, she also said the industry’s potential has been undermined by a “small handful” of bad actors.
To support her case, Lummis cited an October 16 report by the Financial Times (FT), showing that since the conflict began, Israeli intelligence has ordered the closure of more than 100 Binance accounts linked to Hamas.
In addition, citing a Reuters article from May this year, she noted that Israel had seized more than 190 Binance accounts linked to Islamic terrorism between 2021 and 2023.
“The fact that Hamas and other terrorist groups have been permitted by Binance to open accounts clearly shows that Binance could be providing material support to entities engaged in terrorism,” she said.
“Binance is also knowingly facilitating violations of applicable sanctions laws and the Bank Secrecy Act by failing to carry out adequate customer due diligence and screenings, when it is keenly aware the exchange is being used to finance terrorism.”
Although Binance now claims to be cooperating with Israeli law enforcement, Lummis said this is “immaterial” to criminal culpability, as it is only doing so “after they have been caught”.
Likewise, Lummis noted that Tether has frozen 32 wallets linked to terrorism and warfare since the current Gaza-Israel conflict began, but has turned a blind eye to the same laws previously.
“It is well-known that Tether is knowingly facilitating violations of applicable sanctions laws and the Bank Secrecy Act by failing to conduct adequate customer due diligence and screenings, despite being aware that its product is used to facilitate terrorism,” she said.
In addition to these suspected offences, Lummis reminded the DOJ that in 2021 Tether was fined by the Commodity Futures Trading Commission (CFTC) for lying about its reserves.
Lummis a bellwether for changing sentiment among lawmakers
Lummis, who is also a member of the Senate Banking Committee, has long been a vocal supporter of the crypto industry and has made several attempts to pass comprehensive crypto legislation.
In July, for example, she reintroduced the bipartisan Lummis-Gillibrand Responsible Financial Innovation Act that would bring crypto-assets within the regulatory perimeter.
The bill also aims to combat the use of crypto-assets in illicit finance by imposing new penalties for “wilfully” violating AML laws.
That Lummis is willing to publicly call out Binance and Tether speaks to a growing lack of patience among lawmakers with the DOJ on this issue, particularly since the October 7 attacks by Hamas on Israel.
Blockchain analytics 'prove' criminal activity
Although not mentioned by Lummis, one blockchain analytics firm that has published a major study on terrorist use of crypto is Singapore-based ChainArgos.
Earlier this month, as covered by Vixio, a ChainArgos study found that between 2020 and 2023 terrorist groups have handled about $1bn in US dollar stablecoins.
The study is based on wallets flagged by Israel’s National Bureau for Counter Terror Financing (NBCTF) as controlled by terrorist groups, including Hezbollah, ISIS, Hamas and others.
Speaking to Vixio, ChainArgos general counsel Patrick Tan said there is “ample” on-chain evidence to prove that Binance has facilitated terrorist finance and sanctions evasion, and that Tether is used to facilitate these flows.
“As far as is known, that Binance.com and USDT have been used for these illicit purposes is not only uncontroversial, it's incontrovertible,” he said.
Given the strength of the evidence against the two companies, Tan said it makes little sense to prioritise further regulation over proactive enforcement of existing laws.
“I believe the laws we have already cover many (if not all) of the most serious incidents of terrorist financing and money laundering, but existing monitoring and surveillance tools are just not up to the job when it comes to crypto,” he said.
“I don’t think the gap is in regulation, I think the gap is giving teeth to existing laws, by equipping law enforcement with proper surveillance and monitoring tools.”
Jim Preissler, chief strategy officer at SOMA.finance, a decentralised digital asset exchange and issuance platform, took a similar view of where lawmakers’ priorities should lie.
"We don't need more regulations — the goals can be accomplished through existing frameworks,” he told Vixio.
“There are laws on the books that address money laundering, handling client funds, transparency, disclosure requirements and so on. Enforcing those should be sufficient."
