Binance admits it engaged in anti-money laundering as part of $4 billion settlement with US DoJ. Founder, CEO Changpeng Zhao pleads guilty
Binance Holdings has, as expected, reached a $4 billion (£3bn) settlement with the US Justice Department (DoJ) to resolve its years-long criminal investigation into the world’s biggest cryptocurrency exchange and its co-founder and chief executive Changpeng Zhao.
The DoJ announced on Tuesday that “Binance admits it engaged in anti-money laundering, unlicensed money transmitting, and sanctions violations.” Binance has also agreed to pay over $4 billion to resolve the Justice Department’s investigation.
Furthermore, founder and CEO Changpeng Zhao, known as CZ, has “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.”
In March Binance experienced a mini bank run after it was charged by the US Commodity Futures Trading Commission (CFTC), which sued Binance along with its CEO and former top compliance executive, alleging that they were operating an “illegal” exchange and a “sham” compliance program.
Binance however denied it conducted business in the US, and said it made “significant investment” in controls that specifically ban customers with US identity documents or mobile phone numbers, for example.
Then in June, the US Securities and Exchange Commission (SEC) filed lawsuits against both Coinbase and Binance, as well as against Binance’s founder and CEO Changpeng Zhao.
That SEC lawsuit came after it was reported that a senior Binance executive allegedly had primary control over five bank accounts belonging to the cryptocurrency firm’s supposedly independent US affiliate.
The SEC had listed 13 charges against Binance, Zhao and the operator of its purportedly independent US Exchange.
But Binance pushed back against the US financial regulator, and in August filed for a protective court order against the SEC.
Earlier this week it was reported that the US Justice Department was in negotiations with Binance Holdings over a $4 billion (£3bn) deal that could resolve its years-long criminal investigation into the world’s biggest cryptocurrency exchange and its CEO Changpeng Zhao.
And now a settlement for the US federal charges has been confirmed.
“Binance Holdings … 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),” the US DoJ stated.
Binance’s 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 co-ordinated resolutions with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the US 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.”
FTX founder and chief executive Sam Bankman-Fried was found guilty of fraud and money-laundering charges, amongst others, earlier this month.
“Binance turned a blind eye to its legal obligations in the pursuit of profit,” added Secretary of the Treasury Janet L. Yellen. “Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
“Today’s historic penalties and monitorship to ensure compliance with US law and regulations mark a milestone for the virtual currency industry,” said Yellen. “Any institution, wherever located, that wants to reap the benefits of the US financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
According to court documents, Binance admitted to prioritising growth and profits over compliance with US law.
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.
In addition, according to court documents, Zhao, Binance’s founder, owner, and CEO, admitted that he understood that Binance served US users and was thus required to register with FinCEN and implement an effective AML program.
The US DoJ said that Zhao had told employees it was “better to ask for forgiveness than permission,” and prioritised Binance’s growth over compliance with US law. Without an effective AML program, Binance caused transactions between US users and users in jurisdictions subject to US sanctions.
Zhao will personally pay $50 million as part of the settlement deal.
But it has been argued the settlement is a good deal for Zhao, as he will not face criminal charges or jail time, and his vast fortune (he is worth $10.2bn) remains intact, as is shareholding in Binance, the exchange he founded in 2017.
“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,” Zhao posted on X.
RichardTeng, Binance’s former Global Head of Regional Markets, has been named the new CEO of Binance, according to the post.
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…
— CZ 🔶 Binance (@cz_binance) November 21, 2023