Changpeng Zhao, the CEO of Binance, has resigned and admitted guilt in violating US anti-money laundering laws as part of a landmark $4.3 billion settlement, according to statements from prosecutors on Tuesday. This resolution, characterised by prosecutors as one of the largest corporate penalties in U.S. history, comes after a lengthy investigation into Binance, the world's largest cryptocurrency exchange. As part of the settlement, Zhao will personally pay $50 million, and the deal is considered a blow to the cryptocurrency industry, which has recently faced increased scrutiny, including the fraud conviction of FTX founder Sam Bankman-Fried.
As per Reuters, legal experts noted that the outcome was favourable for Zhao, as it allows him to preserve his considerable wealth and retain his stake in Binance, the exchange he founded in 2017.
The charges against Binance include violations of US anti-money laundering and sanctions laws. The exchange failed to report over 100,000 suspicious transactions, involving entities identified by the US as terrorist groups such as Hamas, al Qaeda, and the Islamic State of Iraq and Syria. Additionally, Binance neglected to report transactions with websites engaged in the sale of child sexual abuse materials and emerged as one of the primary recipients of ransomware proceeds.
US Attorney General Merrick Garland stated, "Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges. Binance also did more than just fail to comply with federal law. It pretended to comply."
The settlement, negotiated by the Justice Department with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, entails Binance paying $1.81 billion within 15 months and a further $2.51 billion forfeiture.
Zhao, a billionaire born in China, pleaded guilty in a Seattle court on Tuesday, announcing his resignation on Twitter. In his tweet, Zhao acknowledged his mistakes and expressed emotional difficulty in stepping down, but emphasised it was the right decision for the community, Binance, and himself.
Richard Teng, a longstanding Binance executive, is set to take over as CEO. Despite the leadership change, questions loom over the future of the crypto exchange, given Zhao's continued stake in the company.
Binance has been under the scrutiny of the Justice Department since at least 2018, facing a series of legal challenges in the United States. The CFTC filed civil charges in March, alleging Binance's failure to implement an effective anti-money laundering program. Internal communications revealed that Binance officers and employees were aware of the platform facilitating potentially illegal activities, including transactions involving the militant Palestinian group Hamas.
In a statement, Binance acknowledged the company's responsibility for historical criminal compliance violations, expressing a commitment to turning the page. Richard Teng, in a separate statement, focused on reassuring users about the company's financial strength, security, and safety. However, with Zhao retaining his stake, the extent of his ongoing influence on the company remains uncertain.
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