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Binance to Pay $4.3B to Settle U.S. Criminal Case; Changpeng 'CZ' Zhao Resigns as CEO and Pleads Guilty in Seattle
Richard Teng takes over as CEO of the world's largest crypto exchange.
Updated Mar 8, 2024, 5:27 p.m. Published Nov 21, 2023, 4:16 p.m.
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Binance, the world's largest crypto exchange, was criminally charged with breaking sanctions and money-transmitting laws and agreed to pay $4.3 billion to settle the allegations in "one of the largest penalties" the U.S. has ever obtained from a corporate defendant.
Founder Changpeng "CZ" Zhao pleaded guilty in Seattle to charges he personally faced and agreed to pay a $50 million fine, as well as step down from the CEO job. Richard Teng, a former Abu Dhabi regulator and later Binance's regional markets head, will take over as CEO.
STORY CONTINUES BELOW
Binance was accused of failing to maintain a proper anti-money laundering program, operating an unlicensed money-transmitting business and violating sanctions law, according to a court filing unsealed on Tuesday.
Zhao pleaded guilty to violating the Bank Secrecy Act and causing a financial institution to violate the BSA, according to another filing. His fine will be credited against the amount he owes the Commodity Futures Trading Commission, the U.S. Department of Justice said.
"Binance employees knew and discussed that the company was serving thousands of users in sanctioned countries, and they knew that facilitating transactions between U.S. users and users in sanctioned countries would be in violation of U.S. law. But they did it anyway," Attorney General Merrick Garland said during a press conference on Tuesday afternoon.
The $4.3 billion Binance is paying is among the largest penalties ever obtained from a corporate defendant, Garland said. The exchange's overall fine remains $4.3 billion, with some amount being credited to each agency.
Separately, the U.S. Treasury Department and CFTC announced their own settlements with Binance. Treasury Secretary Janet Yellen noted that Binance's settlement with her department's money laundering and sanctions watchdogs was the largest in Treasury history.
Read more: Binance Got Huge Due to U.S. Customers. That Was Illegal, U.S. Says
Under the terms of its plea, Binance will have to appoint an independent compliance monitor for three years and report its compliance efforts to the U.S. government, alongside the fines. Zhao is prohibited from "any present or future involvement in operating or managing" Binance, though that ban ends three years after the monitor is appointed.
A resolution of the Binance case represents another major U.S. government victory against a big crypto player, coming just weeks after FTX founder Sam Bankman-Fried was found guilty of fraud and conspiracy charges tied to his crypto exchange.
Zhao "prioritized Binance's growth, market share and profits over compliance with" U.S. banking regulations, according to unsealed filings. "Better to ask for forgiveness than permission," he told his employees, the document said. That mindset pervaded Binance's operations in what Zhao termed the U.S. "Grey zone." He saw to it that Binance did not collect "know-your-customer" information on its users because he believed it would inhibit its growth and appeal.
The CEO of the world’s largest crypto exchange pleaded guilty to breaking anti-money laundering laws. This is part of a larger trend of criminal activity in the crypto industry and sadly predictable. I urged @TheJusticeDept to investigate Binance for lying to Congress.
— Elizabeth Warren (@SenWarren) November 21, 2023
Such oversights put Binance at risk of breaking multiple U.S. laws, including sanctions rules. According to the court filings, Zhao's staff warned him that the exchange was servicing users from sanctioned countries.
Binance's response
In a blog post, Binance acknowledged the "resolutions" it reached with the various agencies named, saying the exchange has worked to restructure over the past few years and citing its "new leadership ... with deep compliance experience."
"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.
Teng, the new head of the exchange, said Binance still has around 150 million users and thousands of employees.
"My focus will be on: 1) reassuring users that they can remain confident in the financial strength, security and safety of the company 2) collaborating with regulators to uphold high standards globally that foster innovation while providing important consumer protections 3) working with partners to drive growth and adoption of Web3," he said in a tweet.
Zhao said he may engage in passive investing or being a minority shareholder in different projects, as well as look at decentralized finance (DeFi) more.
'Significant' action
The DOJ announced early Tuesday it would hold a press conference to announce what it described as "significant cryptocurrency enforcement actions," with Garland, Yellen, Deputy Attorney General Lisa Monaco and CFTC Chairman Rostin Behnam. During the press conference, Monaco said Tuesday's action "sent an unmistakable message to crypto and DeFi companies."
Each of the officials mentioned Binance's alleged violations, which include poor anti-money laundering procedures.
"Over five years while building a business with U.S. customers, Binance enabled nearly $1 billion in illegal payments involving sanctioned countries and individuals," Monaco said.
Read more: Binance to Make 'Complete Exit' From U.S., Pay Billions to FinCEN, OFAC on Top of DOJ Settlement
Bloomberg, which first reported that Tuesday's press conference would be about Binance, reported on Monday that Binance could settle the DOJ's charges with a $4 billion fine and a deferred prosecution agreement. Reuters later confirmed the announcement would detail the DOJ's deal with Binance. The Wall Street Journal first reported Zhao would step down.
Binance's BNB token recently dropped 4.6%.
UPDATE (Nov. 21, 2023, 16:45 UTC): Adds additional detail, including confirmation about what Tuesday's press conference will discuss.
UPDATE (Nov. 21, 2023, 17:24 UTC): Adds Wall Street Journal report on Zhao planning to step down and Binance paying a $4.3 billion fine.
UPDATE (Nov. 21, 2023, 18:37 UTC): Adds court document with Binance charges.
UPDATE (Nov. 21, 2023, 18:50 UTC): Adds additional details.
UPDATE (Nov. 21, 2023, 21:10 UTC): Adds details from press conference, blog post.
UPDATE (Nov. 21, 2023, 21:49 UTC): Adds additional details.
UPDATE (Nov. 21, 2023, 22:15 UTC): Adds line on the fine.
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White House crypto advisor Patrick Witt said stablecoins are the “gateway drug” for global finance and that Washington is racing to deliver regulatory clarity.
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The Context: The Executive Director of the President’s Council for Advisors for Digital Assets sat down for an interview with CoinDesk where he said the recent World Economic Forum in Davos served as a stage for the Trump administration to signal its commitment to normalizing digital assets as a permanent asset class. He said:
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- Consumers benefit from this competition, positioning the current administration as firmly on the side of technological innovation.
- The President renewed a pledge at the event to establish the United States as the undisputed "crypto capital of the world".
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- The Senate Agriculture Committee is set to mark up its portion of the market structure bill on Thursday, January 29th at 10:30 AM.
- The Senate Banking Committee has postponed its markup, requiring further mediation on issues like stablecoin rewards and ethics.
- Witt expressed confidence that despite these delays, the legislation will eventually be reconciled and brought to the Senate floor.
Reading Between the Lines: Stablecoins are acting as a "gateway drug" for global business leaders who are beginning to grasp the technology's potential—and its threat.
- Witt observed a cycle where traditional players move from a lack of understanding to fear, and finally to incorporating crypto into their own product offerings.
- While some Senate Republicans worry about stablecoins causing deposit flight from community banks, Witt believes a "smooth glide path" into these future technologies is possible with patience and cooperation.
- “Consumers win when there’s choice,” he said, while also acknowledging concerns from Senate Republicans about community banks and financial stability. The administration, he suggested, sees convergence between crypto and traditional finance as inevitable but wants the transition to be smooth rather than destabilizing to all parties.
- U.S. regulators intend to lead the global regulatory conversation, even if the domestic legislative process results in imperfect "directionally accurate" rules.
What Comes Next: Once the primary market structure bill passes, the administration plans to pivot toward a major crypto tax package.
- Witt suggested there is still a window of opportunity to pass additional digital asset legislation this year before midterms dominate the congressional calendar.
- The administration is also monitoring "developing situations" regarding digital assets potentially seized in national security actions abroad, such as in Venezuela.
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