Ex-Binance Compliance Chief Sees Lessons From Crypto Legal Woes

The former chief compliance officer for the US unit of Binance Holdings Ltd. said the cryptocurrency exchange pushed her to focus on vetting new clients rather than other regulatory and compliance responsibilities typical to the job, such as consumer protection and vendor management.

The “danger signs” during her six-month stint at the company were “disheartening,” said Christina Rea, an attorney who left Binance’s US arm in early 2022, a year before the exchange was charged with money laundering.

Now a consultant, Rea said in an interview that she views her time at Binance as a crash course in the challenges in-house crypto lawyers and compliance professionals face as the broader digital asset market seeks to recover from the reputational concerns surrounding some of its biggest names.

Binance, the world’s largest crypto exchange, and its founder and now former chief executive, Changpeng Zhao, entered guilty pleas last month as part of a $4.3 billion settlement that represents landmark penalties for violations of US financial laws. US financial regulators also hit Samuel Lim, a former compliance chief at Binance’s holding company, with a $1.5 million fine.

Rea joined Binance’s US operation as a part-time, contracted compliance chief in late 2021 after a decade in legal, compliance, and anti-money laundering roles at banking behemoth HSBC Holdings PLC, Blackstone Inc.-owned information technology services provider Mphasis Ltd., and financial technology and blockchain platforms Uphold Inc. and Velocity Markets Inc.

Rea said her time in the traditional banking sector showed her that with the appropriate structures in place, large financial institutions could perform anti-money laundering, know-your-client, and sanctions and transactions monitoring work. “But it takes a really long time to put in place those structures,” she said.

In her job at HBSC, Rea worked with other teams in the compliance department. But at Binance she teamed with executives that handled cyber and information security, customer service, engineering, product, and software, she said.

“Everybody gets inundated quickly, and governance structures can quickly get murky,” Rea said in describing the challenges of a work environment focused on adding new clients and debuting new tokens.

When members of Rea’s US compliance team found themselves pulling certain data in Mandarin and contacting others in Beijing and Shanghai, she said she knew the difference between Binance entities was negligible. The China-born Zhao, a Canadian citizen nicknamed “CZ,” was the ultimate beneficial owner, Rea said.

Internal Obstacles

Binance’s big settlement requires the company to retain a monitor to ensure its compliance with the deal and make changes to a secretive corporate culture.

“It’s not going to be straightforward or easy going,” said Rea, who worked with a monitor during her time at HSBC. “It’s going to be messy, time consuming, and like most things in life, progress will be slow and incremental.”

Many of Binance’s legal and risk executives came from Uber Technologies Inc. Rea said those hired from the ridesharing giant were smart but didn’t know the financial services space. Pressure over clients and a desire to take a company public can complicate the jobs of crypto legal and compliance staffers, she said.

“You know your ultimate boss is the regulators, but you’re also reminded about who is paying your paycheck,” Rea said. “You think, ‘Do I stay here and try to make a difference knowing there’s a lot of stuff going on that shouldn’t be or do I just jump ship and admit defeat?”

Crypto companies under scrutiny for alleged or perceived legal and compliance shortfalls often claim they’re “cleaning house” and hiring “top talent” to right the ship, Rea said. But those companies are usually just recycling individuals who were pushed out elsewhere, she said.

“People tend to be seduced by the big names, but just because they worked at a larger place doesn’t mean they’re the best person for the job,” Rea said. “If they made a mess somewhere else, they’re likely going to make a mess here.”

Rea said she hopes her consultancy can be an outlet for startups in the crypto, fintech, and money services space who, when not looking to undertake a major project, might be dissuaded from retaining a large law or accounting firm at a billing rate beyond their budget. Rea’s consultancy also sees her work with law firms, mostly on crypto-related matters.

Having graduated from law school after the 2008 financial crisis, Rea said she’s never been afraid of taking on a little pro bono work to get her foot in the door on new business. Rea said she’s still learning and grappling with the psychology of how to interact with those fearful of lawyers and compliance officers.

“How do I reach this person and let them know I’m not their enemy?” Rea asked. “I want to help them have a healthy bottom line, robust revenues, and new customers, but I’m here to educate them about the risks if we don’t do it compliantly at the outset.”