DOJ Binance Monitorship Goes to FRA Over Sullivan & Cromwell

The Justice Department has picked consulting firm Forensic Risk Alliance to act as outside monitor for Binance Holdings Ltd., which pleaded guilty to violating US money-laundering regulations and trade sanctions.

FRA was chosen over elite Wall Street law firm Sullivan & Cromwell, the initial favorite for the role, and several other top contenders, according to people who asked not to be named because the matter is confidential.

The Justice Department declined to comment. Spokespeople for Sullivan & Cromwell and FRA didn’t immediately respond to requests for comment.

The appointment of a monitor was a condition of Binance’s November plea deal. The world’s largest cryptocurrency exchange also agreed to pay $4.3 billion in penalties. Binance founder Changpeng Zhao pleaded guilty as well and agreed to step down as chief executive officer. He was sentenced to four months in prison on April 30.

As monitor, FRA will be tasked with ensuring that Binance complies with the plea agreement. It will gain access to internal records, facilities and employees to report on the company’s activities to the government.

FRA, which specializes in corruption and fraud investigations and compliance, previously acted as a consultant to Geneva-based commodities trader Gunvor SA as it negotiated a $660 million resolution with the Justice Department over foreign bribery charges.

The three-year Binance assignment promises a steady stream of billable hours, which is why many lawyers and consultants vie for monitorships. Sullivan & Cromwell, a go-to firm for many Wall Street banks and executives, had been the front-runner for the job. But controversy over the firm’s work for onetime Binance rival FTX ultimately steered the government in a different direction, Bloomberg previously reported.

Sullivan & Cromwell was one of the firms that worked for FTX before its November 2022 bankruptcy, after which it became the cryptocurrency exchange’s main outside counsel. In that role, it has billed some $170 million for its work recovering funds for FTX’s creditors.

Many who lost money in FTX’s collapse suggested Sullivan & Cromwell, in its pre-bankruptcy role, failed to detect fraud being perpetrated by co-founder Sam Bankman-Fried. FTX’s new management consistently defended the firm against the “false narrative” and praised its recovery work.

This week, FTX said its customers would be fully compensated with interest for any losses they suffered in the bankruptcy.

Sullivan & Cromwell is still expected to be appointed to a separate five-year Binance monitorship on behalf of the Treasury Department’s Financial Crimes Enforcement Network. Binance has been asked to identify and report tens of thousands of suspicious activity transactions the Treasury Department accused the company of ignoring in the past.

--With assistance from Sabrina Willmer.

To contact the reporters on this story:
Ava Benny-Morrison in New York at abennymorris@bloomberg.net;
Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Anthony Lin, Anthony Aarons

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