Federal prosecutors are investigating the relationship between Binance and U.S.-based hedge funds as part of a broader investigation into the cryptocurrency exchange's possible skirting of money-laundering guardrails, according to a report by the Washington Post.

Heading the investigation is the U.S. Attorney's Office for the Western District of Washington in Seattle, which, in recent months, has sent subpoenas to firms requesting records of their dealings with Binance, the Post reported, citing two people who had reviewed one of the subpoenas.

The subpoenas come at a time when Binance, the world's largest crypto exchange by daily trading volume, faces intense media and regulatory scrutiny over its business practices and financials. That scrutiny boiled over late last year in the wake of FTX's multibillion-dollar implosion, which rocked investor confidence in an increasingly turbulent and troubled crypto market.

The subpoenas do not automatically mean authorities will bring charges against Binance or its founder and CEO Changpeng Zhao, the Post noted as federal authorities are still discussing a potential settlement with Binance and are assessing whether the evidence they have is sufficient to bring charges.

In past years, Binance acquired a reputation for circumventing regulations and finding legal loopholes to sustain its business' operations in jurisdictions all over the world, according to legal experts who spoke to the Post. The company's previous lack of identification requirements raised concerns from lawmakers over the platform's role in money laundering, according to a former DOJ prosecutor quoted by the Post. Last year, a Reuters report cited evidence Binance had been used as a "hub for hackers, fraudsters and drug traffickers" with connections to the Russia-based dark web marketplace Hydra.

The company's financials have also been deemed opaque by some. Last month, a representative from Nansen, a blockchain data analytics company, told CoinDesk TV’s “First Mover” that there isn't much on-chain [data] or any kind of financial access or transparency into [Binance's] entities."

Recently, Binance has made efforts to increase its commitment to compliance, growing its security and compliance staff by 500% in 2022. Additionally, last fall the company assembled a global advisory board chaired by Max Baucus, a former Democratic senator from Montana. Meanwhile, the exchange seems eager to improve its relations with the U.S. government, recently becoming active in crypto lobbying in Washington, D.C.