The Justice Department designated Forensic Risk Alliance as Binance’s external watchdog after it pleaded guilty to violating U.S. money laundering regulations and trade sanctions.
The Forensic Risk Alliance (FRA) was selected over Wall Street law firm Sullivan & Cromwell and several other major contenders, according to sources who requested anonymity due to the confidentiality of the matter.
Neither the Justice Department, Sullivan & Cromwell nor FRA spokespeople had immediate comment. The monitor’s appointment followed Binance’s November plea agreement. The world’s largest cryptocurrency exchange also agreed to pay a $4.3 billion fine. Binance founder Changpeng Zhao pleaded guilty, agreed to step down as CEO, and was sentenced to four months in prison on April 30.
The FRA ensures that Binance complies with the plea agreement, giving the company access to internal records, facilities, and employees to report its activities to the government. Known for its expertise in corruption, fraud investigations and compliance, FRA previously served as a consultant to Geneva-based commodities trader Gunvor SA in its $660 million settlement with the Department of Justice over foreign bribery charges. .
Sullivan & Cromwell was initially a frontrunner for this role, but faced setbacks due to its controversial work on Binance rival FTX. Concerns were raised after the company joined FTX prior to its bankruptcy in November 2022 and subsequently assumed the role of FTX’s primary outside counsel.
Critics, including those who lost money in the FTX collapse, claimed Sullivan & Cromwell failed to detect fraud by co-founder Sam Bankman-Fried. However, FTX’s new management defended the company against these accusations and praised the company’s recovery efforts.
FTX announced this week that it will reimburse customers for all losses resulting from the bankruptcy, plus interest.
Despite not being selected as an external monitor, Sullivan & Cromwell is expected to secure five years of monitoring rights, separate from Binance, on behalf of the Treasury Department’s Financial Crimes Enforcement Network.
This role includes identifying and reporting tens of thousands of suspicious activity transactions, which the Treasury Department has accused Binance of ignoring in the past.