Binance is taking action to address a loophole in its Link Program that allowed certain prime brokerages to exploit the multi-tiered fee structure provided by Binance. This loophole enabled top-tier brokerage partners to benefit from trading fee discounts that could be arbitrated or passed on to their clients by consolidating multiple accounts and even trading on their behalf. As a result, these platforms were able to generate additional revenue by collecting the difference between their exclusive top-tier pricing benefits and the fees charged to their customers.
Platforms participating in the Link Program were also able to attract customers by offering attractive trading fees that were not available on the retail market, thanks to the savings they obtained from the program.
While this crackdown on arbitrage schemes specifically targets institutional clients, it reflects Binance’s broader efforts to combat platform misuse. In a recent update to users, Binance encouraged them to report any suspicious activities, such as fee arbitrage or institutional accounts violating Know Your Customer requirements. Users who report verified policy violations and bad actors will be rewarded.
Binance continues to emphasize its commitment to compliance despite facing regulatory challenges in various jurisdictions. Former CEO Changpeng Zhao reached a $4.3 billion settlement with the United States Department of Justice in November 2023 for alleged violations of the Bank Secrecy Act and Anti-Money Laundering regulations. Binance.US, although a separate entity, also faces regulatory obstacles from U.S. lawmakers, with North Dakota revoking its money transmitter license. Binance also exited Nigeria earlier this year following accusations of tax evasion and money laundering from the Nigerian government, which also blamed Binance for currency shortfalls. Most recently, the exchange platform was fined $2.25 million by India’s Financial Intelligence Unit for alleged violations of Anti-Money Laundering regulations.