Binance CEO will plead guilty to all charges and will resign; Binance will pay a $4.3 billion fine

November 22, 2023  10:31

Changpeng Zhao, the CEO of Binance, has admitted guilt to charges related to money laundering and will step down from his position as part of a settlement with the U.S. Department of Justice. The cryptocurrency exchange giant will pay a hefty fine of $4.3 billion, bringing an end to a lengthy investigation into the world's largest cryptocurrency exchange.

According to court documents released on Tuesday, Zhao is scheduled to appear in a federal court in Seattle later in the afternoon to formally plead guilty. He and other involved parties face charges of violating the Bank Secrecy Act for failing to implement an effective anti-money laundering program. Additionally, they are accused of intentionally violating U.S. economic sanctions "through deliberate and calculated attempts to profit from the American market without complying with U.S. laws."

In a personal admission of guilt, the former CEO acknowledges his involvement in violating and inciting a financial institution to breach the Bank Secrecy Act, as stated in the plea agreement. The Department of Justice is recommending a $50 million fine for Zhao. Binance, in agreement with the settlement, will also admit guilt and pay fines totaling $4.3 billion, including amounts to settle civil lawsuits brought by regulatory authorities.

Binance is facing three criminal charges, including operating an unlicensed money transmission business, violating the International Emergency Economic Powers Act, and engaging in criminal conspiracy. These charges follow civil lawsuits filed earlier this year by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission, alleging not only involvement in illegal operations such as money laundering and securities fraud but also unauthorized market entry.

In June, the U.S. Securities and Exchange Commission (SEC) filed a comprehensive lawsuit against Binance, claiming that the company operates an illegal securities exchange and misappropriates client funds. Shortly thereafter, the SEC filed a similar lawsuit against competing exchange Coinbase, accusing it of functioning as an unauthorized securities exchange, broker, and clearing agency. Just this week, the SEC filed a lawsuit against Kraken, alleging that the cryptocurrency exchange disguised $33 billion of client crypto assets as the company's own, posing a potential risk of significant losses for its users.

In the 13 charges brought by the SEC against Binance, the agency accuses the exchange of "co-mingling" billions of dollars of client funds with Binance's own funds, similar to allegations made against the bankrupt cryptocurrency exchange FTX. SEC Chairman Gary Gensler explains, "Zhao and Binance structures were involved in an extensive network of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law."

Founded by a Chinese entrepreneur in 2017, Binance rapidly transformed from a relatively unknown brand into a major player in the cryptocurrency market within a few weeks. To this day, Binance remains the world's largest cryptocurrency exchange, processing billions in trade volume annually. The exchange adopted an aggressive approach to expansion, rapidly extending its reach globally, often without obtaining prior approvals. Despite its holding company being based in the Cayman Islands, Binance lacks a unified global headquarters. Zhao consistently resisted calls to establish a headquarters, stating his preference for the platform to operate under a "decentralized" model.

The cryptocurrency industry is particularly concerned about the repercussions of regulatory action not only against cryptocurrency exchanges but also various tokens and blockchains. The SEC contends that some tokens offered on Binance and Coinbase, such as Solana, Cardano, and Matic from Polygon, are securities that should have been registered with the agency.


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