Justice.gov
PRESS RELEASE
Binance and CEO Plead Guilty to Federal Charges in $4B Resolution
Tuesday, November 21, 2023
For Immediate Release
Office of Public Affairs
Binance Admits It Engaged in Anti-Money Laundering, Unlicensed Money Transmitting, and Sanctions Violations in Largest Corporate Resolution to Include Criminal Charges for an Executive
Binance Holdings Limited (Binance), the entity that operates the world’s largest cryptocurrency exchange, Binance.com, pleaded guilty today and has agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).
Binance’s founder and chief executive officer (CEO), Changpeng Zhao, a Canadian national, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) program, in violation of the BSA and has resigned as CEO of Binance.
Binance’s guilty plea is part of coordinated resolutions with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick B. Garland. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco. “Today’s charges and guilty pleas – combined with a more than $4 billion financial penalty – sends an unmistakable message to crypto and defi companies: if you serve U.S. customers, you must obey U.S. law.”
“Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “Binance’s and Zhao’s willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”
“Binance’s crimes gave sanctioned customers unfettered access to American capital and financial services,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division (NSD). “This prosecution is a warning that companies that do not build sanctions compliance into their services face serious criminal penalties, as do the executives who lead them.”
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees.”
“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers,” said Chairman Rostin Behnam of the Commodity Futures Trading Commission (CFTC). “American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.”
“When you put growth above compliance, you end up in hot water,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated U.S. sanctions tied to the International Emergency Economic Powers Act. When you do so, your business becomes a playground for bad actors. Hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams moved through Binance in an attempt to evade detection by law enforcement.”
According to court documents, Binance admitted to prioritizing growth and profits over compliance with U.S. law. Binance launched in 2017 and focused on attracting high-volume customers, including U.S.-based customers. Binance quickly became the largest cryptocurrency exchange in the world, with the greatest share of its customers coming from the United States. As a result of serving U.S. customers, Binance was required to register with FinCEN as a money services business and to implement an effective AML program that was reasonably designed to prevent Binance from being used to facilitate money laundering. Binance chose not to comply with U.S. law and failed to implement controls and procedures to prevent money laundering. Binance also did not implement controls that would have prevented U.S. customers from conducting transactions with customers in sanctioned jurisdictions, despite knowing that the system it used to match customers for transactions would necessarily cause transactions in violation of IEEPA.
Instead of complying with U.S. law, in 2019, Binance announced that it would block U.S. customers and launched a separate U.S. exchange, Binance.US. Despite this announcement, Binance took steps to maintain a substantial number of U.S. customers. In particular, Binance focused on retaining valuable “VIP” customers, which were responsible for a large portion of Binance’s trading volume and revenue. These VIP customers were critical to Binance’s business because they helped provide the necessary liquidity to facilitate trades of digital assets. For example, Binance executives, including Zhao, made a plan to contact VIP customers and help the VIP register a new account for an offshore entity and transfer holdings to that account. Binance employees also called U.S. VIPs to encourage them to provide information that suggested the customer was not located in the United States.
Binance also did not implement the core components of an effective AML program: Binance did not implement comprehensive know-your-customer (KYC) protocols or systematically monitor transactions, and Binance never filed a suspicious activity report (SAR) with FinCEN. For years, Binance allowed users to open accounts and trade without submitting any identifying information beyond an email address. Binance began requiring all users to provide KYC information in August 2021 but allowed users who had not provided KYC to continue trading on the exchange until May 2022. Between August 2017 and October 2022, U.S. users, including VIPs, conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance.
As Binance’s internal communications showed, Binance’s compliance employees recognized that Binance did not have protocols to flag or report transactions for money laundering risks, which employees recognized would attract criminals to the exchange. As one compliance employee wrote, “we need a banner ‘is washing drug money too hard these days – come to binance we got cake for you.’” Due in part to Binance’s failure to implement an effective AML program, illicit actors used Binance’s exchange in various ways, including conducting transactions for mixing services that obfuscated the source and ownership of cryptocurrency; transferring illicit proceeds from ransomware variants; and moving proceeds of darknet market transactions, exchange hacks, and various internet-related scams.
Binance also knew that U.S. sanctions laws prohibited U.S. persons – including its U.S. customers – from trading with its customers subject to U.S. sanctions, including customers in comprehensively sanctioned jurisdictions, such as Iran. Binance knew that it had a significant number of users from comprehensively sanctioned jurisdictions and a substantial number of U.S. users and that its matching engine would necessarily cause U.S. users to transact with users in sanctioned jurisdictions in violation of U.S. law. Nonetheless, Binance did not implement controls that would prevent U.S. users from trading with users in Iran; and, because of this intentional failure, between January 2018 and May 2022, Binance willfully caused over $898 million in trades between U.S. users and users ordinarily resident in Iran.
As part of the plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total financial penalty of $4,316,126,163. Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs. Binance separately has also reached agreements with the CFTC, FinCEN, and OFAC, and the Department will credit approximately $1.8 billion toward those resolutions.
The Department reached its resolution with Binance based on a number of factors, including the nature, seriousness, and pervasiveness of the offense, as a result of which Binance processed billions of dollars of cryptocurrency transactions for U.S. persons and caused U.S. customers to engage in transactions in violation of U.S. sanctions. Binance did not make a timely and voluntary disclosure of wrongdoing, but it received partial credit for its cooperation with the Department’s investigation, and it has taken steps to remediate its compliance program. Binance did not receive full credit for its cooperation because it delayed producing relevant evidence, including recorded meetings in which Binance executives discussed U.S. legal requirements. Accordingly, the total criminal penalty reflects a 20% reduction off the bottom of the applicable U.S. sentencing guidelines fine range.
In addition, according to court documents, Zhao, Binance’s founder, owner, and CEO, admitted that he understood that Binance served U.S. users and was thus required to register with FinCEN and implement an effective AML program. Zhao knew that U.S. users were essential to Binance’s growth and were a significant source of revenue and knew that an effective AML program would include KYC protocols that would mean that some customers would choose not to use Binance. Zhao told employees it was “better to ask for forgiveness than permission,” and prioritized Binance’s growth over compliance with U.S. law. Without an effective AML program, Binance caused transactions between U.S. users and users in jurisdictions subject to U.S. sanctions. These illegal transactions were a clear and foreseeable result of Zhao’s decision to prioritize Binance’s profit and growth over compliance with the BSA.
IRS-CI is investigating the case. The case is being prosecuted by Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorney Elizabeth Carr of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Trial Attorneys Beau Barnes and Alex Wharton of NSD’s Counterintelligence and Export Control Section (CES), and Assistant U.S. Attorney (AUSA) Mike Dion for the Western District of Washington. Trial Attorney Julia Jarrett, formerly of MLARS and currently an AUSA for the District of Oregon, and Trial Attorney Matthew Anzaldi, formerly of CES and currently with NSD’s National Security Cyber Section, made substantial contributions to this investigation and prosecution.
MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system. The Criminal Division has surged resources to the Bank Integrity Unit, which has imposed over $12 billion in penalties on financial institutions for sanctions violations over the last decade. NSD’s Counterintelligence and Export Control Section investigates and prosecutes individuals and corporations for violations of export control and sanctions laws, in addition to other national security crimes. NSD continues to expand its corporate enforcement efforts – including growing the ranks of prosecutors dedicated to this work and establishing a Chief Counsel and Deputy Chief Counsel for Corporate Enforcement.
Updated November 21, 2023
U.S. DEPARTMENT OF THE TREASURY
PRESS RELEASES
U.S. Treasury Announces Largest Settlements in History with World’s Largest Virtual Currency Exchange Binance for Violations of U.S. Anti-Money Laundering and Sanctions Laws
https://home.treasury.gov/news/press-releases/jy1925
Binance Blog
Binance Announcement: Reaching Resolution With U.S. Regulators
2023-11-22
Today we are pleased to inform you that we’ve reached resolutions with the U.S. Department of Justice, Commodity Futures Trading Commission, the Office of Foreign Assets Control, and the Financial Crimes Enforcement Network related to their investigations into historical registration, compliance, and sanctions issues. These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth. With the compliance and governance enhancements enshrined in our commitments, we can begin to share our vision for Binance’s exciting future and the future of the crypto industry. We are confident that Binance will emerge as a stronger company as we lay the foundation for the next 50 years.
While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance. However, when Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have. Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way. Today, Binance takes responsibility for this past chapter.
Over the past two years, we have worked hard to restructure our organization and personnel and upgrade our systems. We have new leadership in place with deep compliance experience and impressive backgrounds ranging from top traditional financial institutions and leading tech companies, to law enforcement and major corporate entities. It is through this process that we have become a stronger, safer, and even more secure platform for our users.
Equally important, we have never faltered in upholding our core values of user security and safety. We take our responsibility as a custodian very seriously and maintain 1:1 backing for every user asset.* This means that users can withdraw 100 percent of their assets from the platform at any time. Of note, in our resolutions with the U.S. agencies they:
do not allege that Binance misappropriated any user funds, and
do not allege that Binance engaged in any market manipulation.
Our deep bench of global leaders has positioned Binance for long-term growth. Our business is focused on protecting our users and building a platform for decades to come. This focus and experience bring added resilience so we can continue to operate on behalf of our users not just for the next five years, but for the next fifty years or more. And our former CEO remains Binance’s majority shareholder and a resource available for consultation on historical areas of our business.
Positioning ourselves for the next fifty years means understanding crypto’s current challenges and working to develop industry-leading standards to address them, including in the areas of compliance, security, cooperation with law enforcement, and user transparency.
As a result of these updates and work with global regulators, Binance is a much stronger company today than it was in the past. We have learned valuable lessons that are applicable across the industry in support of crypto users. We acknowledge that alongside compliance, transparency is essential to rebuilding industry confidence amid challenging market conditions and industry mismanagement. Learning from our own past, we are proud to usher in some of the most significant investments in compliance, security, and transparency of any company in our industry.
Leadership Change
Effective immediately, Richard Teng, Binance’s now-former Global Head of Regional Markets, succeeds CZ as CEO. Richard is a highly qualified leader and, with over three decades of financial services and regulatory experience, he will navigate the company through its next period of growth. Prior to joining Binance, Richard was the CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market; the Chief Regulatory Officer of the Singapore Exchange (SGX), and the Director of Corporate Finance in the Monetary Authority of Singapore.
Compliance and Security
Binance has been systematically working to restructure our organization and personnel, upgrade our systems, and establish a new industry standard in compliance. For example, we have updated and expanded our in-house anti-money laundering (“AML”) detection and analytics capabilities. Binance’s AML compliance is now an industry standard, and Binance continues to make improvements to its comprehensive AML policies. Binance also plays a significant leadership role in helping law enforcement combat cyber and financial crime and terrorism.
Binance was one of the first major exchanges outside of the United States to require mandatory KYC procedures for all users. Today, potential users (none of whom may be a U.S. person) must provide valid identification and submit a “selfie” photograph, which Binance checks against their identification with the support of world-class vendors. Binance also conducts searches via World-Check to identify, for example, any criminal history, connection to terrorism, placement on Politically Exposed (“PEP”) lists, and sanctions watch lists. Binance also utilizes both real-time and post-transaction monitoring tools to detect and stop suspicious transactions. In recent years, Binance has invested tremendous resources to enhance its compliance program. Today, Binance has new leadership in place with deep compliance backgrounds overseeing a team of hundreds of compliance-supporting personnel, including over 60 personnel with prior law enforcement or regulatory agency experience and more than 200 personnel with professional certificates in compliance, including Certified AML Specialists. In addition to the core compliance team, Binance employs hundreds of dedicated operational, product, and tech employees who support the development and execution of the company’s compliance programs.
Binance takes sanctions compliance seriously and has a standalone sanctions team which ensures that the organization diligently complies with global sanctions rules. Binance has also dedicated substantial resources and efforts to sanctions compliance. Today, in addition to KYC and IP blocking, Binance uses advanced third-party tools to voluntarily implement controls and restrictions related to sanctions laws of countries including the United States, including conducting real-time on-chain sanctions transaction monitoring and screening.
Law Enforcement Cooperation
Binance also employs multiple teams that regularly engage with law enforcement agencies and officials, which are collectively staffed with over 70 members. Binance has uncovered and proactively assisted law enforcement in addressing national security-related issues in countries across the world, including the United States. Moreover, from January 1 to November 13, 2023, Binance processed over 52,700 law enforcement requests, serving 12,699 registered law enforcement officers worldwide through its Government Law Enforcement Request System. This is in addition to over 50,000 requests that the team at Binance processed in 2022.
Binance proactively shares knowledge with law enforcement. In 2022, Binance conducted and participated in over 70 workshops training law enforcement on countering cyber- and financial crime across the world. Building on these efforts, in September 2022, Binance announced a formal Global Law Enforcement Training Program designed to help law enforcement detect and combat financial and cybercrimes.
In 2023, our dedicated Law Enforcement Training Team, together with support from our Investigations Team, delivered 120 onsite or online trainings and workshops that invariably received a very positive response from the law enforcement community.
Binance is pleased to be one of the most significant global partners for law enforcement in its fight to combat illicit financial activity around the world.
Commitment to Transparency
Binance carefully safeguards its customers’ assets. Users can always withdraw 100 percent of their assets from the platform at any time. As part of its commitment to transparency, Binance has shared its cold and hot wallet addresses, as well as published Merkle tree proof of reserves and proof of collateral for B-Tokens.
Binance has also established user security measures including the Margin Insurance Fund to protect users from losses when their cross/isolated margin equity is less than zero or when a user is unable to repay their debts. Binance is one of the first cryptocurrency exchanges with a secure fund — known as the Secure Asset Fund for Users (“SAFU”) — to safeguard users in extreme cases. Binance has publicized the wallet addresses for SAFU.
Binance pairs its security measures with education initiatives to allow users to protect themselves and better understand the cryptocurrency ecosystem. As part of its commitment to advancing cryptocurrency education for all, Binance has made publicly available on Binance Academy more than 430 articles, as well as glossary entries and in-depth courses relating to cryptocurrency in 30 languages; collaborated with more than 70 universities across 25 countries to deliver cryptocurrency and Web3 knowledge; and collaborated with local partners to launch an anti-scam campaign to empower users to identify and avoid scammers.
The Future of Cryptocurrency
We strongly believe that the crypto industry and Binance have a bright future.
We have built a community and an ecosystem that empowers individuals to harness the power of blockchain technology to unlock opportunities for their families, communities, and economies around the world, and we are committed to ensuring that the transformative power of these technologies is experienced by more people worldwide.
CZ 🔶 Binance
@cz_binance
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has.
I’m pleased to announce that @_RichardTeng, our now former Global Head of Regional Markets, has been named the new CEO of Binance today.
Richard is a highly qualified leader and, with over three decades of financial services and regulatory experience, he will navigate the company through its next period of growth. He will ensure Binance delivers on our next phase of security, transparency, compliance, and growth.
Prior to joining Binance, Richard was CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market (ADGM); Chief Regulatory Officer of the Singapore Exchange (SGX); and Director of Corporate Finance in the Monetary Authority of Singapore.
With Richard and the entire team, I’m confident that the best days for @Binance and the crypto industry lay ahead.
As a shareholder and former CEO with historical knowledge of our company, I will remain available to the team to consult as needed, consistent with the framework set out in our U.S. agency resolutions.
What’s next for me?
I will take a break first. I have not had a single day of real (phone off) break for the last 6 and half years.
After that, my current thinking is I will probably do some passive investing, being a minority token/shareholder in startups in areas of blockchain/Web3/DeFi, AI and biotech. I am happy that I will finally have more time to spend looking at DeFi.
I can’t see myself being a CEO driving a startup again. I am content being an one-shot (lucky) entrepreneur. Should there be listeners, I may be open to being a coach/mentor to a small number of upcoming entrepreneurs, privately. If for nothing else, I can at least tell them what not to do.
On that note, I am proud to point out that in our resolutions with the U.S. agencies they:
- do not allege that Binance misappropriated any user funds, and
- do not allege that Binance engaged in any market manipulation.
Funds are SAFU!
With that, I look forward to seeing the new leadership take the reins. Please join me in congratulating Richard on his well-deserved promotion.
Onwards!
CZ
4:36 AM · Nov 22, 2023
币安创始人赵长鹏承认洗钱罪并辞职 Richard Teng任新CEO
全球最大加密货币交易所币安（Binance）首席执行官赵长鹏宣布辞职，并承认违反了美国反洗钱法。币安与美国司法部达成43亿美元的和解协议，来解决对这家加密货币交易所已经长达数年的调查。
这一决定可能让公司得以继续营运。但是币安美国早已近乎停止营运，不仅高层纷纷离开，今年初更裁掉一大批员工。
赵长鹏在宣布辞职的X贴文中说：“诚然，在感情上放手并不容易。但我知道这样做是正确的。”
“我犯了错误，我必须承担责任。这对我们的社区、币安和我自己都是最好的选择。”
币安周二表示，该公司区域市场全球主管Richard Teng将接替赵长鹏，成为币安的首席执行官。据LinkedIn资料显示，今年52岁的新加玻人Richard Teng曾在新加坡金融管理局工作长达13年。
现年46岁的赵长鹏是加拿大华裔亿万富翁，出生于中国，12岁时移居加拿大。他于当地时间周二下午在西雅图法庭认罪。
作为和解协议的一部分，赵长鹏个人将需要支付5000万美元罚款，币安将在15个月内支付18.1亿美元，并被没收25.1亿美元。这被检察官称为美国历史上金额最大的企业处罚之一。
这起案件也是继FTX创始人山姆·班克曼-弗里德（Sam Bankman-Fried）近期被判定犯有欺诈罪之后，对加密货币行业的又一重击。
执法部门称，币安违反了美国的反洗钱和制裁法，未能报告与被美国定性为恐怖组织的团体（包括哈马斯、基地组织以及伊拉克和叙利亚伊斯兰国）进行的多达10万多笔可疑交易。
他们说，币安也从未报告与专门销售性虐待儿童材料网站的交易。此外，币安还是勒索软件收益的最大接收者之一。
美国司法部长梅里克·加兰（Merrick Garland）说：“币安让犯罪分子很容易在其交易所转移赃款和非法所得。币安不仅没有遵守[美国]联邦法律，还假装在遵守。”
据路透社去年报道，币安至少从2018年起就受到美国司法部的审查，路透社的一系列报道还首次揭露了币安的一些做法，这些指控既涉及刑事，也涉及民事。
据《纽约时报》报道，与大宗商品期货交易委员会（Commodity Futures Trading Commission）和财政部谈判达成和解的司法部正在寻求对赵长鹏处以18个月的监禁，这是联邦准则下建议的最高刑期。
大宗商品期货交易委员会称，币安前首席合规官Samuel Lim也受到了他们的指控。Lim先生和他的律师都没有立即回应路透社的置评请求。
What is Binance, why is it in so much trouble, and what does it mean for crypto?
Updated 7:35 PM EST, Tue November 21, 2023
New York CNN
There are few figures in crypto that have loomed quite as large in the past few years than Changpeng Zhao — better known as CZ — and the company he founded in 2017, Binance.
Not only is Binance the world’s biggest crypto exchange, it is orders of magnitude larger than its rivals. Up until recently, Binance boasted nearly 60% of the market share for crypto spot trading. Even as that share has waned to closer to 40% since US regulators amped up pressure on the company starting in June, no other exchange even comes close. The Seychelles-based OKX is second in market share at 5.44% and the US exchange Coinbase is third at 5.37%, according to crypto news site CoinDesk.
But Binance’s future at the top of the crypto world is now far from certain as it faces a record $4.3 billion payout to US authorities to resolve criminal charges.
Zhao on Tuesday resigned as CEO and pleaded guilty to federal money laundering charges. US officials called the settlement the biggest-ever corporate resolution involving criminal charges for an executive.
Following a multiyear investigation, US authorities said Binance allowed bad actors on the platform, enabling transactions linked to child sex abuse, narcotics and terrorist financing.
Further, Binance did not have protocols to flag or report transactions for money laundering risks, according to the Justice Department, and employees were well aware that such an oversight would invite criminals to the platform. As one compliance staffer wrote, according to court documents: “we need a banner ‘is washing drug money too hard these days – come to binance we got cake for you.’”
Zhao faces a maximum of 10 years behind bars, though his ultimate sentence will likely be far lower. He also agreed to pay a $50 million criminal fine and a $150 million civil penalty.
“I made mistakes, and I must take responsibility,” Zhao posted on X. “This is best for our community, for Binance, and for myself. Binance is no longer a baby. It is time for me to let it walk and run.”
What it means for crypto
Binance, like its infamous former rival FTX, has been quick to point out that it grew its business rapidly in a chaotic, largely unregulated industry.
“While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance,” the company said in a statement Tuesday. “Binance grew at an extremely fast pace globally… [and] made misguided decisions along the way. Today, Binance takes responsibility for this past chapter.”
It’s a common refrain among crypto firms who find themselves under scrutiny. But federal authorities have made clear that they’re not going to pull any punches when it comes to corporate crime, in crypto or elsewhere.
Analysts see the settlement as a partial victory for Binance and Zhao.
“The avoidance of prison time for CZ and the ability for the exchange to continue operations, albeit without CZ as its CEO, is likely the best outcome given the severity of the accusations against Binance,” said Robert Le, crypto analyst for PitchBook. “Binance’s initial ‘move fast and break things’ approach, which involved offering products that were illegal or entering markets without proper licenses, has led to its current predicament.”
The initial market response to the Binance news was muted, with Bitcoin slipping just over 1% Tuesday afternoon — hardly a blip in the notoriously volatile market.
Investors and entrepreneurs in the crypto space just want to see the industry move on from its early days of idolizing founders.
“The question really is whether or not crypto is actually growing up in a way that is allowing it to have an existence beyond its influential founders who have been shepherding the brand, shepherding the innovation, shepherding the advocacy for these institutions,” said Yesha Yadav, a law professor at Vanderbilt University and an expert on financial regulation. “That’s something that will have to be seen over the next couple of months.”
Yadav notes that the $4.3 billion deal for Binance reflects its status as a systemically important institution — potentially too big to fail.
“What this plea deal does is give Binance as a chance to live another day,” Yadav said. “I think that reflects a worry that if Binance were to be killed, that would cause further damage to average folks who hold money on it to the industry as a whole.”
Binance CEO Changpeng Zhao pleads guilty to federal charges, steps down
cnbc PUBLISHED TUE, NOV 21 20231:24 PM ESTUPDATED 4 HOURS AGO
KEY POINTS
Changpeng Zhao, the billionaire founder and CEO of Binance, has stepped down after pleading guilty to federal criminal charges of violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement.
The plea is part of a $4.3 billion settlement with the Justice Department, according to court documents.
Binance chief Changpeng Zhao pleaded guilty Tuesday to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents. The plea arrangement with the government resolves a multiyear investigation into the world’s largest cryptocurrency exchange.
Zhao appeared before Judge Brian Tsuchida in a Seattle courtroom to enter his plea. Zhao and others were charged with violating the Bank Secrecy Act by failing to implement an effective anti-money-laundering program and for willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” according to the Justice Department.
Zhao said Tuesday in a post on X, formerly Twitter, that he had “made mistakes” and “must take responsibility.” He said Richard Teng, the company’s former global head of regional markets, has been named the new CEO of Binance.
The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission was notably absent.
Treasury Secretary Janet Yellen said in a release Tuesday that the exchange allowed illicit actors to make more than 100,000 transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.
It also allowed transactions associated with terrorist groups such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaida and ISIS, Yellen said in the release, noting Binance “never filed a single suspicious activity report.”
U.S. Attorney General Merrick Garland said in a press conference Tuesday that the fine is “one of the largest penalties we have ever obtained.”
“Using new technology to break the law does not make you a disruptor. It makes you a criminal,” Garland said.
“Binance prioritized its profits over the safety of the American people,” he said.
According to a 92-page consent order between Binance and Treasury’s Financial Crimes Enforcement Network, or FinCen, the crypto exchange “even developed a process to notify VIP users if they became the subject of a law enforcement inquiry.”
Zhao personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.
Zhao has been released on a $175 million personal recognizance bond secured by $15 million in cash and has a sentencing hearing scheduled for Feb. 23.
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 U.S. anti-money-laundering standards. The company is required to appoint an independent compliance monitor.
The case against Binance, which was unsealed Tuesday, shows that three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy.
Binance has agreed to forfeit $2.5 billion to the government, as well as to pay a fine of $1.8 billion.
The Justice Department said in its filing Tuesday that Binance “knowingly and willfully” caused the supply of services to Iran, in breach of U.S. sanctions. It follows a report that Binance processed billions of dollars worth of Iranian transactions.
“Let me be clear: We are also sending a message to the virtual currency industry more broadly, today and for the future,” Yellen wrote in a press brief.
The settlement comes after FTX founder Sam Bankman-Fried was found guilty of several criminal counts of fraud and conspiracy on Nov. 2 following just three hours of deliberation by the jury. Experts told CNBC that, for a high-profile monthlong trial that involved nearly 20 witnesses and hundreds of exhibits, they’d never seen such a speedy decision.
CNBC reached out to Zhao for comment but did not immediately hear back. Binance did not respond to several CNBC requests for comment.
The charges follow civil suits brought earlier this year by both the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Binance has been the center of intense regulatory scrutiny over how it operates, with officials in multiple jurisdictions flagging concerns about the company’s approach toward launching in certain markets even when it lacks the authority to do so, and allegations of involvement in illicit dealings such as money laundering and securities fraud.
The SEC targeted the company with an expansive lawsuit in June, alleging that Binance was running an illegal securities exchange and mishandling customer funds.
The SEC hit rival exchange Coinbase with a similar lawsuit shortly after, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.
And on Monday the SEC sued Kraken, alleging that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.
In the 13 charges brought against Binance by the SEC, the agency accused Binance of commingling billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now-bankrupt crypto exchange FTX. SEC Chair Gary Gensler added, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Started by the Chinese-born entrepreneur in 2017, Binance went from being a relatively obscure name to being a major force in crypto in a matter of weeks. Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trading volume every year.
While its holding company is based in the Cayman Islands, Binance doesn’t have a global headquarters and Zhao frequently resisted calls to create one, saying he wanted the platform to run on a “decentralized” operating model.
In 2021, the U.K.’s Financial Conduct Authority barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its know-your-customer and anti-money-laundering controls didn’t meet its requirements.
In the CFTC’s complaint, the regulator alleged that Binance, Zhao, and the company’s ex-chief compliance officer, Samuel Lim, operated an “illegal” exchange, ran a “sham” compliance program, and violated the Commodity Exchange Act, including laws “designed to prevent and detect money laundering and terrorism financing.”
Binance and Zhao filed a motion in July to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s “fishing expedition.”
Of particular concern for the crypto industry are the implications of the agency’s crackdown on crypto for myriad tokens and blockchains — not just the exchanges. The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms — such as Solana’s sol, Cardano’s ada, and Polygon’s matic — are securities that should have been registered with the agency.
Crypto prices fall as Binance chief pleads guilty to DOJ charges
cnbc PUBLISHED TUE, NOV 21 20231:03 PM ESTUPDATED TUE, NOV 21 20234:22 PM EST
Cryptocurrencies fell Tuesday after Binance founder and CEO Changpeng Zhao, also known as “CZ,” pleaded guilty to criminal charges brought by the U.S. Department of Justice.
Binance Coin slid 5.9%, after rising as much as 5% earlier in the day with hopeful investors eager to see the multiyear investigation into the largest cryptocurrency exchange in the world resolved.
The move weighed on the rest of the crypto market. Ripple’s XRP fell 3.2%, Solana was down by more than 4%. Polygon and Uniswap lost 7.8% and 3.8%, respectively. Meanwhile, bitcoin was down by 1.53%, hovering just below $37,000. Ether was last lower by about 2.1% at $1,992.43.
“Markets are whipsawing with each new piece of information, but will start to settle as we head into the U.S. holiday,” said Michael Safai, cofounder and partner at Dexterity Capital. “Remember, most traders haven’t operated in a market where there is no CZ. Any upside from the settlement may be met with some temporary selling pressure as the market considers how Binance moves forward. But crypto veterans have seen this play out before.”
“It’s hard to see Binance losing its dominance, but this will certainly create room for newer players to fill any void,” he added.
Under the agreement, Zhao will pay a $50 million fine and step down as chief executive.
In a separate action, Binance agreed to plead guilty to violations of the Bank Secrecy Act, knowingly failing to register as a money transmitting business and violating the International Emergency Economic Powers Act. The company is required by the DOJ to pay $4.3 billion in penalties and forfeitures.
The actions against Binance and its founder were a joint effort by the DOJ, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission was noticeably absent.
Elsewhere, investors were also weighing news from another major crypto exchange: Kraken. On Monday evening, the SEC alleged that the company has been operating as an unregistered broker, clearing agency and dealer and that it commingled customers’ crypto assets with its own.
This is the second time this year that the SEC has sued Kraken. In February, the agency said Kraken failed to register the offer and sale of its crypto asset staking-as-a-service program.
Meanwhile, the DOJ on Tuesday commended Tether, the controversial operator of the biggest stablecoin in the crypto ecosystem, for its efforts in freezing $225 million of assets linked to a human trafficking syndicate in Southeast Asia.
Largest crypto exchange Binance fined $4 billion, CEO pleads guilty to not stopping money laundering
Updated 7:19 AM GMT+8, November 22, 2023
WASHINGTON (AP) — The U.S. government dealt a massive blow to Binance, the world’s largest cryptocurrency exchange, which agreed to pay a roughly $4 billion settlement Tuesday as its founder and CEO Changpeng Zhao pleaded guilty to a felony related to his failure to prevent money laundering on the platform.
Zhao stepped down as the company’s chief executive and Binance admitted to violations of the Bank Secrecy Act and apparent violations of sanctions programs, including its failure to implement reporting programs for suspicious transactions.
“Using new technology to break the law does not make you a disruptor, it makes you a criminal,” said U.S. Attorney General Merrick Garland, who called the settlement one of the largest corporate penalties in the nation’s history.
As part of the settlement agreement, the U.S. Treasury said Binance will be subject to five years of monitoring and “significant compliance undertakings, including to ensure Binance’s complete exit from the United States.” Binance is a Cayman Islands limited liability company.
The cryptocurrency industry has been marred by scandals and market meltdowns.
Zhao was perhaps best known as the chief rival to Sam Bankman-Fried, the 31-year-old founder of the FTX, which was the second-largest crypto exchange before it collapsed last November. Bankman-Fried was convicted earlier this month of fraud for stealing at least $10 billion from customers and investors.
Zhao, meanwhile, pleaded guilty in a federal court in Seattle on Tuesday to one count of failure to maintain an effective anti-money-laundering program.
Magistrate Judge Brian A. Tsuchida questioned Zhao to make sure he understood the plea agreement, saying at one point: “You knew you didn’t have controls in place.”
“Yes, your honor,” he replied.
Binance wrote in a statement that it made “misguided decisions” as it quickly grew to become the world’s biggest crypto exchange, and said the settlement acknowledges its “responsibility for historical, criminal compliance violations.”
U.S. Treasury Secretary Janet Yellen said Binance processed transitions by illicit actors, “supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions.”
Binance did not file a single suspicious activity report on those transactions, Yellen said, and the company allowed over 1.5 million virtual currency trades that violated U.S. sanctions — including ones involving Hamas’ al-Qassam Brigades, al-Qaeda and other criminals.
The judge set Zhao’s sentencing for Feb. 23, however it’s likely to be delayed. He faces a possible guideline sentence range of up to 18 months.
One of his attorneys, Mark Bartlett, noted that Zhao had been aware of the investigation since December 2020, and surrendered willingly even though the United Arab Emirates — where Zhao lives — has no extradition treaty with the U.S.
“He decided to come here and face the consequences,” Bartlett said. “He’s sitting here. He pled guilty.”
Zhao, who is married and has young children in the UAE, promised he would return to the U.S. for sentencing if allowed to stay there in the meantime.
“I want to take responsibility and close this chapter in my life,” Zhao said. “I want to come back. Otherwise I wouldn’t be here today.”
Zhao previously faced allegations of diverting customer funds, concealing the fact that the company was commingling billions of dollars in investor assets and sending them to a third party that Zhao also owned.
Over the summer, Binance was accused of operating as an unregistered securities exchange and violating a slew of U.S. securities laws in a lawsuit from regulators. That case was similar to practices uncovered after the collapse of FTX.
Zhao and Bankman-Fried were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019. However, the relationship between the two deteriorated, culminating in Zhao announcing he was selling all of his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.
At this trial and in later public statements, Bankman-Fried tried cast blame on Binance and Zhao for allegedly orchestrating a run on the bank at FTX.
A jury found Bankman-Fried guilty of wire fraud and several other charges. He is expected to be sentenced in March, where he could face decades in prison.
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