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American hedge funds are under regulatory scrutiny as US federal prosecutors want to examine their ties to cryptocurrency exchange Binance as part of the ongoing investigation over alleged violations of money-laundering rules.

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According to a report by The Washington Post, the US attorney's office for the Western District of Washington in Seattle reached out to several US-based investment firms and requested them to hand over records of their contacts with Binance.

Although US prosecutors are deeply examining Binance's communication with hedge funds, they have not accused the crypto exchange of any wrongdoing so far. It is also unclear which hedge funds are communicating with US regulators on the matter.

Binance CEO Calms Down Customers, Hints Exchange Can Withstand Bank Run

In mid-December, Reuters reported that the Justice Department might negotiate a settlement with Binance as prosecutors are still debating on whether they have gathered enough evidence to move aggressively against the exchange.

According to Reuters' sources close to the regulator, at least "half dozen" federal prosecutors believe that the DOJ has enough evidence to fill charges not only against Binance, but also its executives, including founder Changpeng Zhao (CZ). Amid the report, Binance's CZ took to Twitter to advise users to "ignore FUD," although he didn't specifically refer to Reuters' article.

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