“Nothing but another shell company to profit from Russian oligarchs and war criminals.”

Major crypto exchange Binance is reportedly leaving Russia “completely” by selling operations to another firm. But there remain strong doubts as to whether the stock exchange is serious about this – or whether it wants to continue to enrich itself by violating sanctions.

The supposedly world’s largest crypto exchange Binance is known for its peculiar approach to regulation. On the surface, she likes to pretend that she is complying with the requirements – but internally she proactively helps customers to circumvent them.

A similar pattern emerges when dealing with sanctions. Binance is officially leaving the Russian market “completely” by “selling its entire Russian business to CommEX” at the end of September, according to a press release. The “offboarding” will take up to a year to ensure a smooth transition.

It has been recognized, explains Noah Perman, Chief Compliance Officer, “that operations in Russia are not compatible with Binance’s regulatory strategy.” They will therefore focus on the more than 100 other countries in which they operate. Although no details about the sale are being disclosed, it is important, the press release repeats, “that Binance leaves Russia completely.”

Soso.

“Just another shell company”

The deal is a bit questionable, to say the least. “One of the problems is,” explained analyst Adam Cochran said “CommEX doesn’t really exist.” Until the early 2000s, CommEX was a credit card company. The domain was then for sale until it was purchased on September 21st.

CommEX is registered in the Seychelles. It runs on “Binance Cloud” and users can log in with their Binance account using the “Binance Connect” protocol.

Binance Cloud is a type of white label exchange that allows other parties to use Binance technology for their own exchange, but only includes basic services. In addition, Binance Cloud allows you to use Binance’s liquidity. However, it was abolished in 2022. The same applies to Binance Connect. So what CommEX is shouldn’t even exist.

Major crypto exchange Binance is reportedly leaving Russia “completely” by selling operations to another firm. But there remain strong doubts as to whether the stock exchange is serious about this – or whether it wants to continue to enrich itself by violating sanctions. Nevertheless, CommEX already had a trading volume of around one million dollars in the BTC/USDT currency pair on the first day and healthy liquidity in the order book. On the P2P marketplace, large providers trade rubles for Bitcoin – who have already registered eleven days before the exchange’s launch.

“So, there’s this new, unknown exchange that claims to be backed by leading financiers but doesn’t name any of them,” comments Cochran, “which on its first day of operation is buying Binance’s Russian assets, happens to run on Binance Cloud (which no longer exists) and closes their trades against the liquidity on Binance…” In short: CommEX is not only connected to Binance – but “simply another shell company of Binance.”

Adam then asks Cochran a question that leads him deep into a wild labyrinth: “Why is CZ [Binance-Boss Changpeng Zhao] “So determined to keep this payment stream alive that he’s setting up another shell company?” After all, with this obvious charade, Binance risks exacerbating the conflict with Western banks and regulators.

What happened on Binance at the end of June?

Cochran circles a possible answer with several charts and clues that float freely in space on their own, but together create an eerie picture. I have rarely seen such a successful interpretation of political events through charts.

First, he points to a chart at the end of June, when there was a sudden increase in price that was accompanied by a strong delta, i.e. a large difference between buy and sell bids, in the BTC/USD and BTC/RUB trading pairs on Binance. A delta often indicates actual demand as the cause of a price increase.

Around the same time, on June 23rd, CZ had sent out a strange tweet: “1, 2, 3…”. However, there was no news about Binance after that, as expected, which is why the tweet left the scene confused. To this day, no one knows what the Binance boss meant by that.

A few hours after CZ’s tweet, something else happened: First, the ruble volume on Binance skyrocketed – and then the mercenary leader and mass murderer Yevgeny Prigozhin broke camp in Ukraine and marched on Moscow, supposedly to overthrow dictator Vladimir Putin .

Is there a connection? What is the connection between Binance and Prigozhin’s murder squad Wagner?

The Nigerian Naira as a gateway to Africa

Adam Cochran brings another currency pair into play: Bitcoin against Nigerian Naira (NGN). If you compare the deltas between this pair and BTC/RUB on Binance, you will notice that there has been a spike about every two weeks since 2022. “About every 15 days money moves from RUB to BTC to NGN.”

This pattern will continue until early June 2023. As is well known, Wagner troops operate in Africa, for example in Libya, Mali, Mozambique, Sudan and Congo. The Naira is, along with the South African Rand, the most common currency in Africa. It is accepted in many countries on the continent and is easily exchanged for other local currencies without being subject to the same banking restrictions as the rand.

So moving rubles to naira via Bitcoin could be a method to pay the Wagner mercenaries despite the financial sanctions. At the beginning of June, many mercenaries from Africa were brought back to Russia to carry out murders in Ukraine. The pattern then breaks off. Instead, “volume between NGN and BTC reached a peak on Binance; “It finally escalated when the Wagner forces marched on Moscow instead.” One could interpret this as Prigozhin withdrawing money from Africa.

Today, after the failed coup and the alleged murder of Yevgeny Prigozhin, Wagner forces are killing again in eastern Ukraine, but now under the Russian flag. Others, on the other hand, continue to operate in Africa, where they are said to be supporting dictators against their people and seizing raw materials.

Guide to breaking the rules

Earlier this year, Cochran explains, “the government of Nigeria issued a warning about Binance.” The exchange then declared that it would no longer operate in the country, but continued to operate shell companies through which Binance transferred its liquidity to a P2P market redirects.

Apparently there were even separate customer support departments at Binance “that directly support users in sanctioned regions in circumventing KYC limits.” This practice “was also used by residents of Russia and Crimea.”

On August 23, Prigozhin’s plane was shot down, causing money to flow back into the naira. On September 6, two Binance executives, Gleb Kostarev and Vladimir Smerkis, resigned and were quickly replaced by Olga Gonscharova, a former director of the Russian Central Bank, according to Cochran. This had already been hired by Binance in January 2022 to, reports Reuters, maintain “systemic interactions with Russian authorities”.

“… profit from Russian oligarchs and war criminals”

The data points that Cochran lists are partly ambiguous and partly speculative, for example regarding the position of Olga Gonscharova. But they tell a fascinating story that connects trading charts and political events.

The overall picture that emerges is that Binance has made a business model out of using its P2P markets to organize money transfers from Africa, where Wagner mercenaries carry out violence in various regions, to Russia. This runs through Nigerian Naira, Bitcoin, Rubles and USDT.

“CommEX,” Cochran concludes, “is just another shell company for Binance to profit from Russian oligarchs and war criminals.” Binance would therefore be a key node in a global network that stretches from oligarchs in Moscow through Crimea to the heart of Africa , to launder money and finance the operations of mercenary gangs.

The history

The whole thing has a history that is only partially known. After Russia began committing mass murder across borders more than a year and a half ago, Russian banks were hit with sanctions. Crypto exchanges were also required to either completely stop or strictly limit trading with Russian citizens.

In the first step, exchanges had to limit the accounts of Russian users to 10,000 euros. With the tightening of sanctions in autumn 2022, crypto companies were generally banned from doing business with Russian citizens. Because of the sanctions, it was also impossible to deposit money from Russia using Visa and Mastercard.

According to a Coindesk report from April, such deposits on Binance are now possible again, while Russian users report that the limit of 10,000 euros has also fallen. So while Russia commits mass murder on foreign territory every day, Binance has quietly lifted all sanctions.

In August, media also reported that Binance’s P2P trading also allowed several Russian banks sanctioned by the EU in February and the US in May, including Tinkoff and Rosbank, through which Russians could exchange rubles for USDT. After the US Department of Justice applied pressure, Binance delisted these banks – allegedly. Because they were actually represented by “green” and “yellow” cards.

It appears to be a tradition at Binance to offer itself as a helping hand in circumventing sanctions.