Binance, the world’s largest cryptocurrency exchange, has been criminally charged for breaking sanctions and money-transmitting laws. The company has agreed to a $4.3 billion settlement, which is one of the largest penalties obtained by the U.S. from a corporate defendant. Changpeng “CZ” Zhao, the founder, pleaded guilty to personal charges, accepting a $50 million fine, and resigning as CEO. Richard Teng, a former Abu Dhabi regulator and Binance’s regional markets head, will take over as CEO.
Binance faced allegations of inadequately maintaining an anti-money laundering program, running an unlicensed money-transmitting business, and violating sanctions laws, as revealed in a recently unsealed court filing.
- Changpeng “CZ” Zhao admitted guilt for violating the Bank Secrecy Act and causing a financial institution to breach the BSA.
- Zhao’s $50 million fine offsets his liabilities to the Commodity Futures Trading Commission.
- Binance employees knowingly facilitated transactions violating U.S. law, serving users in sanctioned countries.
- Binance’s $4.3 billion settlement is one of the largest penalties ever from a corporate defendant, credited to multiple agencies.
- The U.S. Treasury Department and CFTC reached their own settlements with Binance, marking the largest in Treasury history for money laundering and sanctions violations.
- As part of the plea agreement, Binance must appoint an independent compliance monitor for three years, reporting compliance efforts to the U.S. government.
- Zhao is restricted from any current or future involvement in operating or managing Binance, with the ban lifting three years after the monitor’s appointment.
- The resolution adds to recent U.S. government successes against prominent crypto players, following FTX founder Sam Bankman-Fried’s conviction.
- Unsealed filings indicate Zhao prioritized Binance’s growth, market share, and profits over compliance with U.S. banking regulations.
- Zhao advocated a “Better to ask for forgiveness than permission” approach, influencing Binance’s operations in the U.S. “Grey zone.”
- The intentional avoidance of collecting “know-your-customer” information aimed to foster growth and appeal.
What’s Binance Response?
In a blog post, Binance admitted to reaching agreements with different agencies. They talked about restructuring and having new leaders with good compliance experience. Binance is confident it will become stronger in the next 50 years. The new leader, Teng, assured users about Binance’s money strength and safety. He mentioned working with regulators for global standards and growing Web3 with partners. Zhao might invest passively, be a minority shareholder, and explore decentralized finance (DeFi).
Zhao Retains Binance Stake
- Vanderbilt University law professor Yesha Yadav sees the large fine as manageable for Binance and suggests the deal aims to let Binance continue while removing CZ (Changpeng Zhao), a key figure linked to its growth.
- While Zhao retains his stake, there’s a possibility he could still influence the company despite stepping down as CEO.
- Zhao’s net worth is $10.2 billion, according to Forbes.
- Given the serious violations, Zhao appears to have come out favorably, retaining his wealth and Binance ownership after resolving significant legal issues.
- Robert Frenchman of Mukasey Frenchman LLP notes Zhao’s significant wealth reduces the likelihood of substantial U.S. jail time, emphasizing his retained ownership stake in a legally resolved Binance.
- Prosecutors likely considered enticing Zhao to surrender and convincing Binance to pay a substantial fine when weighing penalties against benefits.
- Jeffrey Cohen, former federal prosecutor and Boston College Law School assistant professor, suggests the government made a calculated decision to secure a substantial corporate fine and slightly lesser penalties for individual defendants.
The DOJ announced a press conference for “significant cryptocurrency enforcement actions,” involving Garland, Yellen, Monaco, and CFTC Chairman Behnam. During the conference, Monaco highlighted Binance’s alleged violations, emphasizing inadequate anti-money laundering procedures. The actions signaled a message to crypto and DeFi companies, revealing that, over five years, Binance facilitated nearly $1 billion in illegal payments involving sanctioned countries and individuals.
Bloomberg initially reported that Tuesday’s press conference would focus on Binance, suggesting a potential settlement involving a $4 billion fine and a deferred prosecution agreement. Later confirmed the details of the DOJ’s deal with Binance. The Wall Street Journal was the first to report Zhao’s intention to step down. Following the news, Binance’s BNB token experienced a 4.6% decline.