Binance restricts account with more than $1 million upon “law enforcement” request

Binance, the world’s largest crypto exchange by daily volume, confirmed on Twitter that it had restricted an account that held more than $1 million at the time. The following tweet was in response to allegations by the account holder who goes by ‘TezosBakingBad’ on twitter.

The account in question was restricted as the result of a law enforcement request, which @TezosBakingBad is well aware of, as he was already advised of this multiple times and provided the LE contact form through our support chat system on 7/6, 7/12, and 7/22.

— Binance (@binance) August 25, 2022

What’s all the fuss about

The group that holds the account in question also happens to be an active Tezos tools contributor. They shared their predicament on Twitter on 25 August, explaining how Binance had “blocked” their corporate account on 1 July. 

The tweet further added that the balance of the account, which the holder claimed was more than $1 million, was set to zero by the exchange. The tweet was further addressed to Binance CEO Changpeng Zao and also warned users to stay away from the exchange.

Binance hits back

Binance responded within hours, and revealed that the concerned account was restricted due to a request by “law enforcement”. It is unclear at this point exactly which law enforcement agency prompted this action.

“Binance is required to cooperate with such requests, the same as any other exchange.” the tweet said.

Binance also revealed that the account holder had already been informed of the same, stating that the tweet from TezosBakingBad was an attempt to “mislead the community”.

“There is a process to contest the seizure with the agency should you wish to pursue that path. But that is done through the agency, Binance has zero control over that process.” the exchange further clarified.

The Estonia connection

Baking Bad’s LinkedIn profile reveals that the company is based in Estonia. This might explain why its Binance account was subjected to restriction.

Earlier this year, Estonia introduced additional anti-money laundering laws which included a modified definition of Virtual Asset Service Providers. This change led to crypto related services being included in said definition. 

Within the updated law is a provision which essentially bans non-custodial wallets. A violation of this carries penalties up to €400,000.

The co-founder of Baking Bad, Michael Zaikin, also co-founded Atomex, a hybrid DeFi exchange that provides non-custodial wallets. This might also have something to do with their account restriction.

From Russia with sanctions

Earlier this year, Binance imposed restrictions and made changes to the exchange’s offerings to users from Russia, following the European Union’s fifth package of Sanctions against Russia over the latter’s invasion of neighboring Ukraine. 

The changes for accounts, held by Russian nationals or residents of Russia, restricted them from trading on the exchange if their account had over €10,000.

Binance’s staked and earned deposits, as well as its spot, futures and custody wallets were made unavailable to the restricted accounts.