Binance Under Fresh US Scrutiny Over Alleged $1.7 Billion Sanctions Exposure
Cryptocurrency giant Binance is once again in the crosshairs of US lawmakers, following a new inquiry led by Democratic Senator Richard Blumenthal. The senator has raised concerns that the exchange may have facilitated extensive violations of US and international sanctions, particularly involving Iran, and has demanded sweeping internal records from the company.
Senate Opens Probe Into Binance’s Sanctions Controls
In a letter dated February 24 and sent to Binance co-CEO Richard Teng, Blumenthal cited investigative reports alleging that the exchange enabled “large-scale violations” of sanctions regimes. According to the senator, Binance is suspected of having allowed about $1.7 billion in transactions linked to Iran to flow through its platform.
The letter asserts that these transfers may have aided organizations designated as terrorist groups and supported covert Russian oil sales executed via a so‑called “shadow fleet” of tankers used to dodge international restrictions.
Blumenthal has initiated the inquiry through the Senate’s Permanent Subcommittee on Investigations (PSI), a powerful oversight body that frequently conducts high-profile probes into corporate and governmental misconduct. As part of this preliminary investigation, the subcommittee is demanding extensive documentation from Binance, with a response deadline set for March 6, 2026.
What Information the Senate Wants From Binance
The PSI’s document requests reportedly cover several key areas:
– Binance’s potential involvement in Iranian money laundering schemes
– Internal assessments and communications concerning sanctioned individuals and entities
– Records showing how the exchange has handled users and partners with suspected ties to Iran, Russia, and terrorism financing
– Details on the firm’s sanctions and anti-money-laundering (AML) compliance systems and any changes made over time
These records are intended to help the subcommittee determine whether Binance simply failed to prevent sanctions breaches or actively turned a blind eye to potential wrongdoing despite internal warnings.
Alleged Findings From Binance’s Internal Reviews
Blumenthal’s letter leans heavily on prior reporting by major US media outlets, which claim that Binance’s own compliance team had uncovered troubling patterns. According to these accounts, internal reviews identified two key partners-Hexa Whale and Blessed Trust-as intermediaries allegedly used to launder funds and facilitate trade with Iranian government-linked entities.
Internal investigators reportedly flagged around 2,000 Binance accounts that appeared to be associated with Iranian users or organizations, despite stringent US banking rules and Binance’s public statements that it blocks access for users in Iran.
Documents obtained by journalists also suggest that Binance had information indicating Hexa Whale might be channeling money to terrorist organizations, including Yemen’s Houthi movement. Investigators inside the exchange were said to have traced digital asset transfers to wallets allegedly linked to Iran’s Islamic Revolutionary Guards Corps (IRGC), as well as payments to crew members working aboard ships in Russia’s sanctions-evading oil fleet.
Claims of Ignored Warnings and Rejected Controls
Blumenthal accuses Binance of failing to act decisively in the face of these red flags. According to the letter, members of the internal compliance team recommended tightening “know your customer” (KYC) standards and explicitly banning sailors associated with Russia’s shadow fleet from using the platform.
Those recommendations, the senator says, were not implemented. Instead, Binance allegedly granted VIP status to Hexa Whale, even though the firm was suspected of using forged documentation. Media reports further claim that some Hexa Whale personnel were directly involved in Blessed Trust’s disputed trading activity, deepening concerns that these entities were not ordinary clients but part of a broader risk network.
Binance Pushes Back: “No Evidence of Sanctions Violations”
Binance has categorically rejected the accusations, including those raised before Blumenthal’s letter became public. In a statement dated February 22, the company said it had conducted an internal review and found “no evidence of violations of applicable sanctions laws.”
The exchange also denied claims that it had fired internal investigators for highlighting sanctions-related risks. Binance insisted that it encourages robust compliance discussions internally and that sanctions and AML issues are treated as top priorities.
Company Highlights Compliance Upgrades Since 2023 Settlement
In its response to the emerging controversy, Binance emphasized that it has undergone a major overhaul of its compliance apparatus since reaching a high-profile settlement with US authorities in 2023. According to the firm, its exposure to sanctions-related activity-as a share of overall trading volume-fell from 0.284% in January 2024 to 0.009% by July 2025, a reduction the company describes as 96.8%.
Binance also states that volumes connected to four major Iranian crypto platforms were substantially reduced. The company claims that monthly transaction volume involving those exchanges dropped from $4.19 million in January 2024 to $1.1 million by January 2026.
To underscore its efforts, Binance says roughly one-quarter of its global workforce now works directly on anti-money-laundering and sanctions compliance. This includes specialists in transaction monitoring, on-chain analytics, risk assessment, and regulatory reporting across multiple jurisdictions.
Why This Inquiry Matters for Binance and the Crypto Sector
The new Senate probe lands at a pivotal moment for Binance and the broader digital asset ecosystem. Regulators worldwide are ramping up pressure on crypto platforms to demonstrate that they can effectively prevent money laundering, sanctions evasion, and terrorism financing.
For Binance, which has already faced penalties, enforcement actions, and regulatory restrictions in several countries, another major US investigation could have significant business and reputational consequences. A negative outcome might lead to:
– New fines or settlements
– Tighter restrictions on operating in the US or partnering with US-facing institutions
– Stricter global scrutiny, as other regulators often take cues from US actions
The case also serves as a test for how governments view the role of centralized exchanges in global financial crime. If lawmakers conclude that current controls are insufficient, the industry could face more aggressive, prescriptive rules on customer onboarding, transaction monitoring, and cross-border data sharing.
Sanctions, Crypto, and National Security Concerns
The core of the Senate’s concern lies in the intersection of cryptocurrency and national security. Sanctions are one of the primary tools used by the US and its allies to pressure states like Iran and Russia, limit funding to militant groups, and restrict access to the global financial system.
If crypto platforms allow sanctioned entities to move funds outside traditional banking rails, they risk undermining these policies. Allegations that digital assets have been used to finance groups such as the IRGC or the Houthis resonate strongly in Washington, where lawmakers increasingly link crypto oversight to counterterrorism and foreign policy priorities.
This is why even relatively small percentages of sanctions-related volume can attract intense attention: regulators tend to focus less on the share of activity and more on the nature of the counterparties involved.
The Compliance Challenge for Global Exchanges
Large international exchanges like Binance face a structural dilemma. They operate across dozens of countries, each with its own regulatory framework, and serve users who can mask their identities or locations through VPNs, intermediaries, or forged documents.
To stay on the right side of the law, platforms must:
– Screen users and transactions against constantly updated sanctions lists
– Use blockchain analytics to track suspicious fund flows
– Rapidly respond to internal alerts and external law-enforcement requests
– Maintain clear governance so that compliance teams can act independently of commercial pressures
The allegations in Blumenthal’s letter-whether ultimately proven or not-speak directly to this last point. If compliance staff raised alarms and those warnings were overridden in favor of lucrative client relationships, that would cut against the narrative that Binance has fully embraced a compliance-first culture.
What Comes Next for the Senate Inquiry
The PSI’s request that Binance submit documents by March 6, 2026 suggests that lawmakers are preparing for a long, detailed review rather than a quick, symbolic intervention. Over the coming months and years, several developments are possible:
– Expanded scope: The subcommittee could broaden its investigation to include other exchanges or service providers if evidence suggests a wider pattern of sanctions evasion.
– Public hearings: Senate hearings featuring testimony from Binance executives, compliance experts, and former employees are a common next step in such probes.
– Legislative proposals: Findings from the inquiry could feed into new laws aimed at tightening crypto regulation, particularly on sanctions and AML obligations.
– Coordination with agencies: The PSI may share evidence with enforcement bodies, potentially prompting additional investigations or settlements.
How cooperative Binance appears-and whether its internal records support or contradict media allegations-will heavily influence the inquiry’s trajectory.
Implications for Users and the Market
For everyday traders and institutional participants, the immediate impact may be more psychological than operational. But even without instant regulatory action, the probe can have ripple effects:
– Market sentiment: Negative headlines about compliance and sanctions can intensify volatility in Binance-related tokens and trading pairs.
– Banking access: Banks and payment processors may reassess their exposure to Binance if they perceive heightened regulatory risk.
– Onboarding hurdles: To preempt criticism, Binance might further tighten KYC requirements, leading to longer verification times and more rigorous documentation checks.
At the same time, if Binance is able to substantiate its claim that sanctions risk has dropped sharply and that its internal controls now meet or exceed industry standards, the company could use the inquiry as an opportunity to rebuild trust and differentiate itself on compliance.
A Broader Turning Point for Crypto Regulation
The unfolding confrontation between Binance and the US Senate is more than a single-company story. It illustrates how crypto has moved from a niche financial experiment to a domain where national security, foreign policy, and high-stakes geopolitics converge.
Regardless of the final outcome, the investigation is likely to accelerate several trends:
– Stricter due diligence expectations for all major exchanges
– Greater emphasis on transparent reporting of sanctions and AML metrics
– Closer coordination between regulators, law enforcement, and blockchain analytics firms
– A growing divide between fully regulated platforms and loosely supervised offshore operations
For the crypto industry, adapting to this new environment will mean balancing openness and accessibility with rigorous, auditable control systems. For Binance, the coming years will determine whether it can convincingly demonstrate that its recent compliance overhaul is not just cosmetic, but genuinely effective in preventing the kind of sanctions-related activity now under Senate scrutiny.