Binance, a major global cryptocurrency exchange, fiercely denied it had helped Russian authorities track down donations to the opposition, in response to an investigation published by Reuters on Friday.
According to Reuters, last April, Gleb Kostarev, Binance head of Eastern Europe and Russia, met with Russia's anti-money laundering agency, Rosfinmonitoring (Rosfin). According to Kostarev's messages reviewed by Reuters, he "consented to Rosfin's request to agree to share client data," telling a colleague he didn't have "much of a choice," the article said.
Around the same time, Rosfinmonitoring was looking for ways to track crypto donations to the organizations of Russia's opposition leader Alexei Navalny, Reuters wrote. Navalny raised millions in donations from supporters, with a surge of new funds after his assassination attempt and then arrest in Russia in January 2021.
On its official blog later on Friday, Binance posted that "suggestions that Binance shared any user data, including Alexei Navalny, with Russian FSB-controlled agencies and Russian regulators are categorically false," adding that "Binance has not sought to actively assist the Russian state in its attempts to investigate Alexei Navalny."
Kostarev, in turn, posted on his Facebook page that it was "an absolute lie" that he or Binance "leaked the data of Navalny or users to Rosfin or FSB."
"Today, any government or law enforcement agency in the world can request user data from Binance as long as it is accompanied by the proper legal authority. Russia is no different," Binance went on, saying that the crypto exchange "has not entered into any form of agreement with the Russian government that differs from any other jurisdiction – these obligations are ordinary and any traditional bank for example would be subject to the same requirements."
Binance "will be writing a formal complaint to Reuters under their own editorial code," the statement reads.
Binance also published emails the company received from Reuters and its responses to it. In particular, Binance Chief Communications Officer Patrick Hillmann asked Reuters's journalists about an "off-the-record conversation" and complained the media company did not agree, "as there is quite an interesting story that should be told here, but we simply can't share it without putting our peoples' lives in danger," Hillmann wrote. He did not elaborate on what kind of danger was in question.
Although there are no direct indications of whether Binance indeed shared any user data with Rosfinmonitoring, Reuters noted that, last April, Kostarev took a meeting with Rosfinmonitoring officials arranged by the Digital Economy Development Fund and German Klimenko, former adviser to Russia President Vladimir Putin on internet development. Binance did not challenge the fact of the meeting itself.
Rosfinmonitoring is also closely associated with Russia's Federal Security Service (FSB), Reuters wrote. FSB, a notorious secret service that is the successor of the KGB, sent its agents to poison Navalny with a nerve agent in the fall of 2019, according to a joint investigation by Bellingcat and Navalny's team.
Sergey Mendeleev, CEO of a crypto startup InDeFi, told CoinDesk he could not comment on the story as he is "under the non-disclosure agreement related to the criminal case against the FBK." The FBK is Navalny's Anti-Corruption Foundation, which was labeled a "terrorist organization" by Russian authorities. At the moment, the organization is being investigated for a theft of donations – a charge it denies – while Navalny is in jail, doing time he was sentenced to for a slew of other charges. The politician's supporters, as well as multiple human rights advocates, believe the actual reason for Navalny's imprisonment is his vocal criticism of Putin's regime.
Amnesty International designated Navalny a Prisoner of Conscience last May, saying that "Navalny has not been imprisoned for any recognizable crime, but for demanding the right to equal participation in public life for himself and his supporters, and for demanding a government that is free from corruption."
According to Reuters' story, Binance "told Reuters it had never been contacted by Russian authorities regarding Navalny." It said that before Russia's war with Ukraine Binance was "actively seeking compliance in Russia," which would have required it to respond to "appropriate requests from regulators and law enforcement agencies," the article states.
Several sources in the Russian crypto market told CoinDesk they would not be surprised if Binance had cooperated with Rosfinmonitoring, although they were not aware of any direct evidence it had. Some noted that any cryptocurrency exchange working on the Russian market would have to respond to requests from an AML agency.
But Navalny's chief of staff Leonid Volkov, who has been managing the fundraising campaign, told CoinDesk he doesn't believe Binance actually shared Navalny donors' data with Fordinmonitoring. "I believe Reuters was wrong. there are also multiple inconsistencies in the article."
As an example of such inconsistency, Volkov mentioned that in April 2021, Binance did not require verification for all Russian users. The exchange, indeed, made KYC obligatory for Russian users in August 2021, meaning that before that, they could buy small amount of crypto and donate them to Navalny without giving their personal data to Binance at all.
The invasion's impact
Before the Russian invasion of Ukraine this winter, Binance had been taking active steps to become a legitimate part of Russia's crypto scene, joining regulatory working groups and even hiring the former central bank executive Olga Goncharova as its head of government relations.
"Like every other blockchain company operating in Russia, prior to the war with Ukraine, Binance was actively pushing for Russia to develop an effective crypto regulatory framework – an effort we are undertaking in every market we operate in," Binance said in a statement shared with CoinDesk. It added that after the war started Binance "aggressively implemented sanctions against Russia."
After the invasion, Binance stopped accepting payments with Russia-issued Visa (V) and Mastercard (MA) bank cards, following Visa and Mastercard themselves disconnecting Russian clients from the global payments networks. On Thursday, Binance also limited Russian accounts with balances over 10,000 euros to withdrawal-only mode.
UPDATED (April 23 10:43 UTC): Adds comment from Navalny's chief of staff.
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