Binance fined $4B

CHANGPENG ZHAO / AP
CHANGPENG ZHAO / AP

WASHINGTON — The U.S. government dealt a massive blow to Binance, the world’s largest cryptocurrency exchange, which agreed to pay a roughly $4 billion settlement on Tuesday, Nov. 21, 2023, as its founder and chief executive officer Changpeng Zhao pleaded guilty to a felony related to his failure to prevent money laundering on the platform.

Zhao stepped down as the company’s chief executive and Binance admitted to violations of the Bank Secrecy Act and apparent violations of sanctions programs, including its failure to implement reporting programs for suspicious transactions.

“Using new technology to break the law does not make you a disruptor, it makes you a criminal,” said U.S. Attorney General Merrick Garland, who called the settlement one of the largest corporate penalties in the nation’s history.

As part of the settlement agreement, the U.S. Treasury said Binance will be subject to five years of monitoring and “significant compliance undertakings, including to ensure Binance’s complete exit from the United States.”

Binance is a Cayman Islands limited liability company.

The cryptocurrency industry has been marred by scandals and market meltdowns. Zhao was perhaps best known as the chief rival to Sam Bankman-Fried, the 31-year-old founder of the FTX, which was the second-largest crypto exchange before it collapsed last November. Bankman-Fried was convicted earlier this month of fraud for stealing at least $10 billion from customers and investors.

Zhao, meanwhile, pleaded guilty in a federal court in Seattle on Tuesday to one count of failure to maintain an effective anti-money-laundering program. Magistrate Judge Brian A. Tsuchida questioned Zhao to make sure he understood the plea agreement, saying at one point: “You knew you didn’t have controls in place.”

“Yes, your honor,” he replied.

Binance wrote in a statement that it made “misguided decisions” as it quickly grew to become the world’s biggest crypto exchange, and said the settlement acknowledges its “responsibility for historical, criminal compliance violations.”

Illicit actors

U.S. Treasury Secretary Janet Yellen said Binance processed transitions by illicit actors, “supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions.”

Binance did not file a single suspicious activity report on those transactions, Yellen said, and the company allowed over 1.5 million virtual currency trades that violated U.S. sanctions — including ones involving Hamas’ al-Qassam Brigades, al-Qaeda and other criminals. Zhao’s sentencing is set for Feb. 23, however it’s likely to be delayed. He faces a possible guideline sentence range of up to 18 months.

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