How crypto giant Binance built ties to a Russian FSB-linked agency?

The regional chief of Binance, the world's largest crypto exchange and a trading place of several cryptos from Bitcoin to Ethereum to $Quint, met with Russia's financial intelligence agency in Moscow. According to text texts exchanged by a company official to a business associate, the Russians wanted Binance to agree to send over client data, including names and addresses, to assist them in fighting crime.

According to a source acquainted with the situation, the agency, known as Rosfinmonitoring or Rosfin, was trying to track down millions of dollars in bitcoin raised by imprisoned Russian opposition leader Alexei Navalny. The payments were used to fund efforts to uncover corruption within President Vladimir Putin's government, according to Navalny, whose network Rosfinmonitoring was added to a list of terrorist organizations earlier this month.

Binance's head of Eastern Europe and Russia, Gleb Kostarev, consented to Rosfin's request to agree to share client data, the messages showed. He told the business associate that he didn't have "much of a choice" in the matter.

Kostarev declined to comment for this story. Russian officials have never approached Binance about Navalny, according to Reuters. It said it was "actively seeking compliance in Russia" prior to the war, which would have meant responding to "appropriate requests from regulators and law enforcement organizations."

According to Reuters, the encounter was part of Binance's behind-the-scenes efforts to strengthen ties with Russian government authorities as it attempted to expand its rapidly growing company in the nation. This narrative is based on interviews with over ten persons familiar with Binance's Russian operations, including former workers, ex-business partners, and crypto industry insiders, as well as an examination of text messages sent by Kostarev to people outside the company.

Despite calls from the Ukrainian government for Binance and other exchanges to block Russian users, Binance has continued to function in Russia since Putin ordered his forces into Ukraine on February 24. Since the Kremlin initiated what it terms a "special operation" to demilitarize and "denazify" Ukraine, several major payment and fintech companies, such as PayPal and American Express, have ceased services in Russia. EXMO.com, one of Binance's key competitors in Russia, said on Monday that it would no longer serve Russian and Belarusian clients and would sell its Russian operations. There are still a few smaller crypto exchanges around.

CEO Changpeng Zhao, widely known by his initials CZ, has said he is against the war and "politicians, dictators that start the wars" but not against "the people on both sides of Ukraine and Russia that are suffering." Zhao didn't comment for this article. Binance referred Reuters to Zhao's previous statements on the matter.

"Active contact with the Russian government has now ceased due to the conflict," Binance's legal representatives told Reuters. Because of the current European Union restrictions on Moscow, Binance informed users on Thursday that it will be suspending services for key clients in Russia.

According to statistics from a leading industry research organization, Binance's trading volumes in Russia have increased dramatically since the war began, as Russians have turned to crypto to shield their assets from Western sanctions and a depreciating rouble. In a recent correspondence to an industry contact, Kostarev stated that Binance's top aim was to keep the market open and avoid "creating a fuss." He didn't go into detail.

Asked by Reuters to clarify Kostarev's message, Binance said the war and economic crisis could accelerate crypto's adoption among working-class Russian citizens looking for alternative payment means. Binance added that it is aggressively applying sanctions imposed by Western governments, but would not unilaterally "freeze millions of innocent users' accounts."