Binance, OKX Continue Processing Illicit Funds Despite Pardons, Fines

A Growing Problem in the Crypto World

Major crypto exchanges have continued to process illicit funds despite legal actions and oversight, highlighting significant vulnerabilities in the digital financial system. According to a report, these exchanges, including Binance and OKX, have been linked to organized crime and money laundering operations, even after agreeing to comply with regulatory measures. The systemic weaknesses in the industry reveal a lack of meaningful improvements in compliance practices.

The issue is not limited to one region or platform. The ICIJ investigation traced tens of thousands of transactions linked to major criminal networks, including cybercriminals, Russian laundering gangs, and Chinese trafficking operations. These networks exploited the decentralized nature of crypto infrastructure to move illicit funds without adequate scrutiny.

The problem worsened in 2025 when the U.S. Treasury designated certain entities as primary laundering concerns, but exchanges like Binance and OKX still continued to receive large sums from these entities. Analysts argue that the industry's compliance frameworks are overwhelmed by the sheer volume of transactions and the lack of global regulatory uniformity.

Why the Standoff Happened

The legal troubles for Binance and OKX began with plea agreements that revealed their failure to monitor transactions effectively. Binance, for example, admitted to insufficient anti-money laundering protections and agreed to maintain robust KYC records. Despite these agreements, the exchange continued to process large volumes of transactions from entities linked to criminal activity.

OKX also pleaded guilty in February 2025 and agreed to have an independent compliance consultant, but blockchain analysis showed that its accounts still received substantial sums from known criminal groups. These cases illustrate the challenges of enforcing compliance in a fast-moving, decentralized financial ecosystem.

Presidential pardons and political influence also played a role in shaping the landscape. In October 2025, President Trump pardoned Changpeng Zhao, the founder of Binance, ending what the administration called the "war on crypto." This move was seen as a win for the crypto industry but raised concerns among regulators and investigators who argue that it sent a signal of regulatory lenience.

How Markets Reacted

The market responded to these developments with a mix of optimism and caution. Binance continued to grow, reaching 300 million registered accounts in December 2025. The exchange attributed its success to strong liquidity, reliable execution, and robust market depth, which helped it manage volatility and attract a wide range of users. However, this growth came despite ongoing scrutiny over its compliance practices and involvement in illicit transactions.

Other exchanges also expanded their operations. HTX received approval to begin the licensing process in Pakistan, reflecting the country's growing interest in a regulated digital asset market. The approval underscored the potential for crypto to become a more mainstream financial tool, but also raised questions about how effectively such platforms can enforce AML and CFT measures.

Meanwhile, the U.S. Treasury rejected a bid by Xtellus to acquire assets from Russian oil company Lukoil, signaling continued regulatory caution in high-risk transactions. This decision reflected a broader trend of tightening oversight on assets linked to geopolitical risks and illicit finance.

What This Means for Investors

Investors are increasingly aware of the risks associated with crypto crime and compliance failures. The FBI reported that Americans lost $9.3 billion to crypto-related crimes in 2024, a 67% increase from the previous year. These losses are difficult to recover due to the lack of insurance and traceability in many crypto platforms.

The victims of these crimes often lack the tools and support needed to recover their funds. Police and local authorities frequently struggle with the technical complexity of tracking crypto transactions and lack the resources to pursue cross-border investigations. This gap in enforcement leaves victims financially and emotionally vulnerable.

For institutions and regulators, the challenge is to balance innovation with accountability. FV Bank recently partnered with the Institute for Financial Integrity to enhance its compliance education across global operations. The bank's move to adopt a tailored training program for its employees highlights the growing importance of compliance in the digital banking sector.

However, many crypto exchanges continue to lag in their compliance efforts. Former compliance staff at major platforms reported feeling overwhelmed by the volume of alerts and the lack of resources needed to investigate suspicious activity. Without significant investment in compliance infrastructure, the risk of illicit finance will persist.

Risks to the Outlook

The future of the crypto industry hinges on how effectively it can address these compliance and enforcement gaps. Global regulators are taking different approaches: some, like Singapore and the EU, are implementing stricter licensing and transparency rules. Others, like the U.S., have seen shifts in enforcement priorities, with some civil cases dropped under the Trump administration while criminal investigations continue.

The lack of a unified framework creates opportunities for bad actors to exploit weaker jurisdictions. Blockchain's transparency, while a potential tool for enforcement, has not translated into effective consumer protection. For meaningful reform to occur, there must be increased cooperation between exchanges, regulators, and law enforcement.

Without these changes, the vulnerabilities in the system will remain. The continued processing of illicit funds by major exchanges and the inability to recover stolen assets from victims indicate that the system is not working as intended.