Binance and CEO admit financial crimes, billions coughed up to US govt
Chief quits, pays own penalty after helping crooks launder cash, aiding sanctions evaders
The world's largest cryptocurrency exchange just got a little smaller, with the US Department of Justice announcing Binance and its CEO Changpeng Zhao have both pleaded guilty to a multitude of financial crimes. As a result Binance will fork out $10 billion to Uncle Sam in fines and settlements.
According to a criminal case [PDF] unsealed Tuesday, Binance failed to register as a money services business in the United States, broke the Bank Secrecy Act by failing to implement and maintain an anti-money laundering program, and violated the International Emergency Economic Powers Act by allowing US users to transact with individuals in sanctioned countries.
Those three crimes, prosecutors noted, were all done "knowingly" and "willfully," and included the transfer of nearly $1 billion to "persons [Binance] had reason to believe resided in Iran."
"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 US history," Attorney General Merrick Garland said during a press conference today. Binance also facilitated trades to users in Syria, Russia and Russian-controlled parts of Ukraine, it's said.
The Justice Department noted Binance was chiefly interested in profiting from its customers, as opposed to ripping off or defrauding them, and that the biz conspired to operate as an unlicensed exchange to "gain market share and profit as quickly as possible."
Better to ask forgiveness than permission
The outfit knew that it would lose market share if it was cut off from US users, and so acted to ensure that the VIP users moving the most cryptocurrency on its platform had access to its non-US platform, to which access in America was supposed to have been cut off in 2019 after the creation of Binance.us.
"Defendant chose not to comply with US legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain US users," the DoJ said in its court filings. According to a 2019 chat message sent by Zhao to the Binance team, he knew full well his company was violating the law, too.
"If we blocked US users from day 1, Binance will be not [sic] as big as we are today," Zhao said in the chat, according to Uncle Sam. "Better to ask forgiveness than permission."
Other internal communications made it clear Binance knew it was being used as a conduit to launder illicit funds, with a compliance employee quipping at one point that "we need a banner 'is washing drug money too hard these days - come to Binance we got cake for you.'"
Binance will cough up $4.3 billion in fines and forfeitures to the Dept of Justice as part of its guilty plea.
The exchange also reached settlements Tuesday with the US Commodity Futures Trading Commission (CFTC) and the Treasury Department's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Asset Controls (OFAC). The CFTC will extract $1.35 billion from Binance, while the Treasury Department's enforcement arms have settled with Binance for a combined $4.4 billion - the largest haul in Treasury's history, Chair Janet Yellen said.
In addition to the monetary settlements, Binance is also being required to implement proper anti-money laundering capabilities and will have to report to US agencies for the next three years on its compliance.
"The message here should be clear: Using new technology to break the law does not make you a disruptor. It makes you a criminal," said Garland. The DoJ noted that Binance's total fine was reduced by 20 percent due to its cooperation with US investigations.
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Zhao, meanwhile, will be paying penalties of his own, with $150 million owed to the CFTC. Zhao is also stepping down from his role as CEO of Binance, he confirmed in a post on X shortly after the DoJ press conference, announcing that Binance's former global head of regional markets, Richard Teng, would be immediately taking over.
The former chief will also keep his majority share of Binance, though won't be allowed be an executive within it.
Zhao's statement made little mention of the reason for his resignation, but he did note that the guilty pleas didn't include any allegations that Binance misappropriated customer funds or engaged in market manipulation (unlike some other crypto outfits).
Binance's statement regarding the settlements makes the same statement about the safety of user funds while adding that the company is "taking responsibility for this past chapter" while now being "a much stronger company today than it was in the past."
Binance is still facing charges from the Securities and Exchange Commission, which was not party to the settlements. ®