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The US Department of Justice (DOJ) has chosen Forensic Risk Alliance (FRA) for Binance’s three-year monitorship over initial favorite Sullivan & Cromwell (S&C), BNB Bloomberg reported today.
This is a requirement of Binance’s November plea deal for violating money-laundering regulations and trade sanctions. Binance also agreed to a $4.3 billion penalty, and CEO Changpeng Zhao stepped down and received a four-month prison sentence.
FRA’s role will involve scrutinizing Binance’s internal operations to ensure compliance and reporting findings to the government. The firm has a history of similar assignments, including consultancy for Gunvor SA during its $660 million settlement with the DOJ.
The selection of FRA over Sullivan & Cromwell, a prestigious Wall Street law firm, marks a shift from the expected outcome. The firm was initially considered for the role but ultimately rejected. This is likely due to their past work on FTX, Binance’s rival crypto exchange that went bankrupt in November 2022.
Sullivan & Cromwell has come under fire from FTX investors for its involvement with the company. A group of FTX investors, who initiated a lawsuit against the firm in February, claimed the firm knowingly provided services or assistance that directly enabled or facilitated FTX’s fraudulent activities.
This week, FTX unveiled a new plan to pay out at least 118% of recognized claims to 98% of its creditors. The reorganization plan, subject to approval by the Bankruptcy Court, faced pushback from Sunil Kavuri, who represents the largest group of FTX creditors. He argued that repayments should reflect the current market prices of assets, not their value at the time of FTX’s bankruptcy.
Kavuri also cited S&C’s previous relationship with the exchange. He opposes the inclusion of an exculpation clause that would protect S&C from lawsuits related to misconduct.
The DOJ’s choice of FRA for the Binance monitorship has been welcomed by those affected by the FTX collapse, with Kavuri stating, “Truth prevails.”
We asked @TheJusticeDept and Judge Kaplan to hold co-conspirators accountable at SBF’s sentencing
Sullivan and Cromwell were the lead to monitor Binance
DOJ has now picked Forensic Risk Alliance to monitor Binance
Well done to every FTX customer for all the victim impact… pic.twitter.com/DuDjaAr8F3
— Sunil (FTX Creditor Champion) (@sunil_trades) May 10, 2024
However, the report noted that S&C might still be appointed as a monitor for Binance by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
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