Binance, the world’s largest cryptocurrency exchange, will pay a $4.3 billion fine as CEO pleads guilty to federal charges

By Chicago 7 Min Read

Binance, the world’s largest cryptocurrency exchange where users from around the world buy and sell electronic forms of money, admitted to violating US laws to prevent money laundering and sanctions violations and agreed to pay the government $4.3 billion in fines and fees. The Department announced this on Tuesday. CEO Changpeng Zhao also pleaded guilty to a federal charge.

Binance has been investigated by numerous regulators and law enforcement agencies, including the Commodities Futures Trading Commission. The company acknowledged Tuesday that it had failed to take adequate measures to prevent money laundering on its platform and that it had been operating illegally in the United States, allowing traders from nations currently sanctioned by the federal government — such as Iran — to engage in trading deals with the Americans.

Interview with Binance CEO Zhao Changpeng

Zhao Changpeng, CEO of Binance, poses for a photograph after an interview on Bloomberg Television in Tokyo, Japan, Thursday, Jan. 11, 2018. Akio Kon/Bloomberg via Getty Images

The platform’s founder and CEO, Zhao, a Canadian citizen, pleaded guilty in federal court on Tuesday to violating anti-money laundering laws and agreed to step down from Binance’s leadership. He faces a sentence of 1 to 10 years in prison, with sentencing set for next year.

Zhao tweeted that stepping down as CEO was difficult. “Of course, it wasn’t easy to let go emotionally. But I know it’s the right thing to do. I made mistakes and I need to take responsibility. This is better for our community, for Binance, and for myself,” he posted. He added that Richard Teng, global head of regional markets, will be the new CEO.

Federal investigators said the cryptocurrency exchange, which processes billions of dollars’ worth of transactions, illegally profited by allowing darknet actors and ransomware hackers to operate on the platform and failed to adequately screen other illicit services.

Between January 2018 and May 2022, prosecutors said Binance processed 1.1 million transactions totaling nearly $900 million between Americans and individuals believed to be in Iran. Zhao and company executives were presumably aware that exchanging American money would require the platform to follow U.S. sanctions laws, but they also considered users in the United States vital to growth.

A separate exchange, Binance.US, was created for use by American cryptocurrency traders, but investigators say Americans also remained on the original, unregulated Binance platform.

“The purpose of the conspiracy was to allow Binance to operate as a virtual currency exchange and gain market share and profits as quickly as possible,” reads the criminal information to which the company pleaded guilty. The defendants allegedly encouraged high-value clients to “hide and obfuscate their connections to the United States,” court documents say.

Attorney General Merrick Garland, Treasury Secretary Janet Yellen, Deputy Attorney General Lisa Monaco and other federal officials announced the multibillion-dollar settlement Tuesday.

“Binance has allowed illicit actors to transact freely, supporting activities ranging from child sexual abuse to illegal narcotics to terrorism across more than 100,000 transactions,” Yellen told reporters on Tuesday. “This includes transactions associated with terrorist groups such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda and ISIS.”

“Using new technologies to break the law does not make you a disruptor,” Garland said. “It makes you a criminal.”

“Binance became the largest cryptocurrency exchange in the world in part because of the crimes it committed,” Garland said. “He is now paying one of the largest corporate fines in U.S. history.”

Zhao, who founded the company in 2017 and continued to operate the platform, appeared in a Seattle court on Tuesday to plead guilty to failing to maintain effective anti-money laundering programs. He admitted knowingly bypassing some filtering processes for bad actors on his platform and failing to file suspicious activity reports with regulators, according to criminal information filed Tuesday.

According to Justice Department officials, part of the platform’s agreement with the Departments of Justice and Treasury includes a provision that Binance will continue to cooperate with U.S. laws, file suspicious activity reports, and appoint a new CEO with a background in compliance.

Binance is still fighting an unrelated lawsuit filed by the Security and Exchange Commission that alleges the company failed to register in the United States and illegally diverted investor funds to an account controlled by Zhao.

Binance did not immediately respond to CBS News’ request for comment.

Binance’s settlement with the Department of Justice comes just weeks after Sam Bankman-Fried, the founder of another cryptocurrency exchange, FTX, was found guilty of seven counts of fraud, conspiracy and money laundering in following the dramatic collapse of the platform. He was accused of using FTX funds on real estate and other projects unrelated to the business.

Justice Department officials said Tuesday they constantly monitor cryptocurrency exchanges for compliance and stressed the need for emerging and disruptive companies to prioritize regulations over a company’s growth.

“A business strategy that puts profits before compliance is not a path to wealth; it is a path to federal prosecution,” Monaco said in a statement.

More Robert Legare

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