In a significant development, Binance, the world’s largest cryptocurrency exchange, and its (now former) CEO Changpeng Zhao (AKA “CZ”), have pleaded guilty to criminal charges related to anti-money laundering and US sanctions violations. The US Justice Department, in collaboration with the Treasury Department and the Commodity Futures Trading Commission, have agreed a plea deal that will see Binance pay a AUD$6.6B (USD$4.3B) in penalties.
The charges against Binance include money laundering violations, conspiracy to conduct an unlicensed money transmitting business, and US sanctions violations.
The penalties comprise a USD$1.8B criminal fine and a USD$2.5B forfeiture. The funds will be distributed amongst the Department of Justice, the Commodity Futures Trading Commission, and other agencies, with a significant portion allocated to the Treasury Department for sanctions violations.
The company’s former CEO, CZ, has agreed to step down and pay a substantial fine as part of the settlement. This outcome resolves a number of aspects of a long running investigation into Binance’s operations by US authorities.
CZ has been seen by many as an industry pioneer shaping the future of finance. The man himself appeared sanguine about the outcome with both himself and Binance looking to the future under the leadership of Richard Teng, a well known markets professional and former regulator:
Notably, the Securities and Exchange Commission’s (SEC) was not a party to the settlement and its remains to be seen whether Binance will face further regulatory action in the United States or elsewhere. The SEC has recently doubled down on its “regulation by enforcement” approach to the crypto industry taking fresh enforcement action this week against Kraken for alleged securities violations.
The new CEO, Richard Teng, has endorsed suggestions that Binance will simply pay the massive fine in cash due to the businesses assets, noting the company was debt-free and highly profitable.
The latest US action against Binance is likely to form just the latest salvo in the US authorities enforcement drive against the crypto industry. It also underlines the United States very broad approach to its jurisdiction, particularly in the area of anti-money laundering and financial sanctions. In this regard, Binance joins a long list of institutions which have felt the brunt of US enforcement action over allegations of systemic breaches of AML/CTF laws and financial sanctions.
Written by Luke Higgins, Steven Pettigrove and Michael Bacina