Binance founder and CEO Changpeng “CZ” Zhao has pleaded guilty to money laundering charges and reached an agreement with U.S. authorities that may allow the crypto exchange to resume operations.
Publicly released legal papers on Tuesday outlined an attempt by Zhao and other top Binance excluding to avoid laws, including parts of the Bank Secrecy Act. This law requires financial institutions and their employees to find out their customers’ true identities, steer clear of dealing with criminals or those prohibited by economic sanctions, and register any U.S.-based businesses with regulators.
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 🔶 BNB (@cz_binance) November 21, 2023
The documents revealed that customers from Iran, Cuba, and Syria, all facing sanctions, could use the Binance platform.
A Binance compliance employee also wrote that the company was welcoming individuals involved in laundering drug money.
The employee’s message suggested that Binance made it easy for such activities, saying, “Is washing drug money too hard these days? Come to Binance, we got cake for you.”
Zhao has agreed to a $50 million fine and is set to resign as the company’s CEO. He said stepping down was the right decision. Zhao remains a shareholder of the company and will provide advice if necessary.
While federal sentencing guidelines indicate a potential 18-month prison term for Zhao, senior Justice Department officials are considering seeking a more severe penalty.
The Canadian citizen was granted bail at $175 million, backed by $15 million in cash. A federal judge has allowed Zhao to return to the United Arab Emirates, where he has been residing this year.
Zhao has mentioned his eagerness to take a break from his tiring schedule and plans to do some “passive investing.” He is one of the most influential figures in the industry, with over 8.5 million followers on X.
Furthermore, according to federal authorities, Binance has admitted to wrongdoing and consented to pay the government $4.3 billion in fines and restitution.
“By failing to comply with U.S. law, Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges,”
Merrick Garland, U.S. Attorney General Merrick Garland.
Binance has resolved its legal issues with the Justice Department, the Treasury Department, and the Commodity Futures Trading Commission, all of which investigated the company for an extended period.
Prosecutors claimed that Binance neglected to establish an anti-money laundering program and deliberately caused violations of U.S. economic sanctions. The charges further asserted that Binance failed to register with the U.S. Treasury as a “money transmitting business” to prevent regulators from discovering its involvement in facilitating billions of dollars in cryptocurrency transactions without implementing proper “know your customer” measures.
In Binance’s plea agreement, the company has agreed to prevent Zhao from being involved in the business for three years, starting when the plea is accepted and ending when a monitor is appointed. During this three-year period, Binance will also improve its compliance program and appoint an independent monitor to oversee compliance.
Former Binance global head of regional markets Richard Teng is replacing Zhao as the CEO of the crypto exchange, according to Zhao’s post on X. Teng used to lead the Financial Services Regulatory Authority at Abu Dhabi Global Market and held other top positions.
Binance has been under public scrutiny since last year. Zhao’s public comments contributed to the downfall of FTX, once a major competitor. In April this year, Binance.US, the exchange’s American entity, canceled a $1.3 billion deal to acquire crypto broker Voyager Digital’s assets due to a challenging regulatory environment.
In August, Checkout.com ended its partnership with Binance due to concerns about the crypto company’s alleged issues with anti-money laundering, sanctions, and compliance controls. At the time, Binance’s spokesperson said the company disagreed with Checkout’s reasons for termination and considered legal options.