Changpeng Zhao’s agreement with the government resolves a years-long investigation into Binance. Zhao and others were charged with violating the Bank Secrecy Act by failing to effectively implement an anti-money laundering program and willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from U.S. markets without implementing controls required by U.S. law,” according to the Justice Department.
On X, Zhao admitted to “making mistakes” and “taking responsibility.” He added that Richard Teng, former head of global markets, would become Binance’s new CEO.
The action against Binance and its billionaire founder is a joint effort between the Department of Justice, the Commodity Futures Trading Commission, and the Department of the Treasury.
In a press release on November 21, Treasury Secretary Janet Yellen said the exchange enabled more than 100,000 transactions by illicit actors supporting activities such as terrorism and narcotics. It also enabled more than 1.5 million virtual currency transactions that violated US sanctions.
It also allowed transactions related to terrorist groups such as Hamas' Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda and ISIS. Ms. Yellen noted that Binance "has never filed a suspicious activity report."
Attorney General Merrick Garland said at a press conference that afternoon that the fine was "one of the largest penalties we have ever obtained." Ms. Yellen shared that this was the largest enforcement action in the history of the Treasury Department.
“Using new technology to break the law does not make you a disruptor. It makes you a criminal,” Garland continued. “Binance prioritizes its profits over the safety of the American people.”
Binance has even developed a process to “notify VIP users if they become the subject of a law enforcement investigation.”
The former Binance executive personally pleaded guilty. The Justice Department also asked the court to impose a $50 million fine on Zhao.
Binance will continue to operate but with new ground rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with US anti-money laundering standards. The company will be required to appoint an independent compliance monitor.
Binance agreed to pay $2.5 billion in compensation to the government, as well as a $1.8 billion fine.
The settlement comes shortly after FTX founder Sam Bankman-Fried was found guilty of multiple counts of criminal fraud and conspiracy after just three hours of jury deliberations.
For a month-long trial involving nearly 20 witnesses and hundreds of exhibits, experts told CNBC they had never seen such a quick decision.
Binance has come under scrutiny for the way it operates, with officials in multiple jurisdictions expressing concerns about the company’s “passionate” approach to launching in certain markets despite lacking the authority to do so, and allegations of involvement in illegal transactions such as money laundering and securities fraud.
Founded by a Chinese entrepreneur in 2017, Binance went from obscurity to a major force in the cryptocurrency space in just a few weeks.
To this day, Binance remains the world's largest cryptocurrency exchange globally, handling billions of dollars in trading volume each year.
The exchange has taken an aggressive approach to growth, rapidly expanding its reach globally often without prior permission.
While its parent company is based in the Cayman Islands, Binance does not have a single global headquarters and Zhao has frequently resisted calls to do so, saying he wants the platform to run on a “decentralized” operating model.
In 2021, the UK Financial Conduct Authority banned Binance from operating in the country. Binance recently scrapped plans to pursue a full UK license after the regulator said its anti-money laundering and customer due diligence controls did not meet requirements.
(According to CNBC)
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