The Federal Investigation Agency (FIA) of Pakistan has sent an inquiry to Binance as part of a criminal investigation into a scam that allegedly used Binance wallets and integrated applications to defraud about $100 million from Pakistani users.
Head of FIA Cyber Crime Zone Sindh Imran Riaz tweeted a letter sent to Binance's Cayman Islands office and Humza Khan, the general manager at Binance Pakistan, dated Jan. 6, 2022.
"As reported to this office by number of complainants, an online financial scam took place in Pakistan affecting thousands of victims from different cities of the country involving fraudulent applications robbing innocent people of millions of dollars," said the letter.
The investigation so far found fraudulent accounts on 11 applications: MCX, HFC, HTFOX, FXCOPY, OKIMINI, BB001, AVG86C, BX66, 91FP, UG, TASKTOK. The investigation found 26 Binance wallets linked to the applications.
The fraudsters asked Pakistani users to register an account with Binance, and then transfer funds from their Binance wallet to the application. The users were then added to Telegram groups where the administrators would give advice on price action until users had transferred considerable funds into the applications. The applications would then crash and make off with the funds.
The FIA estimates that the average investment per person on these apps was $2,000, and each app had about 5,000 customers, meaning scammers made off with an estimated $100 million.
"It is pertinent to mention here that Binance is the largest unregulated virtual currency exchange where Pakistanis have invested millions of dollars," said the FIA in a statement. "Fia Cyber Crime Sindh has started steps towards keeping a close eye on peer to peer transactions done by Pakistanis on Binance to curb the menace of terror financing and money laundering as Binance is the largest easy-to-go platform facilitating such activities."
The Jan. 6 letter seems to be the start of those steps. It requests records on the 26 wallets, in addition to other operational questions like how the process with which the fraudulent applications were linked to Binance. The FIA said it expects Binance's cooperation, but in the case the exchange does not comply, the FIA said it will be ustified to "recommend financial penalties on Binance through State Bank of Pakistan."
Binance Pakistan tweeted that it does not comment on specific regulatory matters, but that its general approach is one of cooperation.
"We do not comment on specific matters with regulatory and law enforcement authorities," said the tweet. "However, as a matter of policy, our general approach is to cooperate with investigations wherever possible. Specifically, Binance tries to work closely with the law enforcement and regulatory."