The US Department of Justice (DOJ) announced late yesterday that Binance has agreed to pay a $4.3bn settlement fee over several money laundering, KYC failure and illegal money transmitting charges.
One of the largest settlement payments from a corporate defendant in US history, the development spells the end of Changpeng Zhao’s tenure as CEO, as it was announced he will be stepping down from his position.
Zhao, also known as “CZ”, will pay an individual fine of $50m after pleading guilty to charges placed against him with Richard Teng, an ex-Abu Dhabi regulator, assuming the role as Binance’s new CEO.
According to a court filing, Binance “willfully violated the Bank Secrecy Act by failing to implement and maintain an effective anti-money laundering program”, and violated US economic sanctions.
The world’s largest cryptocurrency exchange was found to have made a “deliberate and calculated effort to profit from the US market without implementing controls required by US law”.
Many of the violations Binance committed are in connection to the charges the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) placed against the exchange this year.
In March, the CFTC alleged that Binance and Zhao “knowingly” disregarded US financial regulations and operated as an “illegal off-exchange commodity”.
Attorney General Merrick Gerland held a press conference following the announcement of the Binance settlement, condemning the actions of the crypto exchange and its Founder Zhao.
He said: “Binance employees knew and discussed that the company was serving thousands of users in sanctioned countries, and they knew that facilitating transactions between US users and users in sanctioned countries would be in violation of US law. But they did it anyway.”
The $4.3bn penalty will be credited to various agencies, while Zhao’s $50m fine will be credited to the CFTC.
Binance has been ordered to appoint an independent compliance officer for the next three years and report its efforts to the US government under the terms of its plea deal. Separately, Zhao will be banned from being involved in any or future involvement in Binance for three years.
Zhao, who resides in the United Arab Emirates – which does not have an extradition treaty in place with the US – arrived in Seattle to plead guilty to his involvement in Binance’s lack of AML and KYC measures.
The court filing revealed that the former Binance CEO “prioritised Binance’s growth, market share and profits over compliance” as Zhao stated he wanted to “take responsibility and close this chapter” in his life.
A statement from Binance was made in a blog post, acknowledging the resolutions with the US agencies and citing its steps in creating a competent compliance team over the past several years.
“We are confident that Binance will emerge as a stronger company as we lay the foundation for the next 50 years,” the blog post said.
Payment Expert Analysis: This groundbreaking penalty to the world’s largest crypto exchange only compounds the sceptical nature surrounding the market and hurts investor confidence further, similar to the collapses of FTX, Genesis and Celsius over the past year.
