U.S. Department of Justice Appoints Forensic Risk Alliance as External Monitor for Cryptocurrency Exchange Binance

The U.S. Department of Justice has designated the law firm Forensic Risk Alliance (FRA) as the external monitor for the cryptocurrency exchange Binance, according to Bloomberg reports. This decision concludes a competitive process in which FRA emerged victorious over the well-established firm Sullivan & Cromwell, previously considered the favorite for the role.

Forensic Risk Alliance is known for its expertise in handling cases of corruption and fraud, as well as compliance with regulatory standards. This firm recently served as a consultant for Geneva-based commodity trader Gunvor SA during its negotiations with the U.S. Department of Justice concerning a $660 million foreign bribery case.

The choice of FRA over Sullivan & Cromwell was significantly influenced by the latter's involvement with the now-defunct cryptocurrency exchange FTX. Sullivan & Cromwell had been scrutinized for its failure to detect fraudulent activities by Sam Bankman-Fried, who has been sentenced to 25 years in prison for his role in the FTX collapse.

Initially, Sullivan & Cromwell had been favored to secure the position of external monitor for Binance, given their reputation and extensive service to major companies and financial institutions. However, their relationship with FTX, coupled with accusations from FTX's aggrieved clients who claimed the firm did not act swiftly enough to identify the fraud, cast a shadow over their candidacy.

Moreover, in February 2024, creditors of FTX filed a class-action lawsuit against Sullivan and Cromwell, alleging direct involvement in the fraudulent schemes of the exchange. They accused a former employee of the firm of actively participating in the conclusion of 20 transactions with FTX, which further tarnished the firm's reputation.

The media suggest that the U.S. government took these controversies into account when deciding to opt for the services of another legal entity. This decision reflects a cautious approach by the U.S. authorities, aiming to avoid potential conflicts of interest and ensure rigorous monitoring of Binance's operations.

The appointment of FRA as Binance's external monitor underscores the ongoing efforts by U.S. regulatory bodies to enforce stringent oversight over the cryptocurrency market. This move is part of broader measures to enhance transparency and security in the financial sector, particularly in areas susceptible to high risks such as fraud and corruption.