The U.S. government recently dealt a huge blow to Binance, the world’s biggest cryptocurrency exchange, as it agreed to pay a hefty $4 billion settlement. The company’s founder and CEO, Changpeng Zhao, pleaded guilty to a felony related to his failure to prevent money laundering on the platform.
This settlement is one of the largest corporate penalties in the nation’s history. As part of the settlement agreement, Binance will be subject to five years of monitoring and significant compliance undertakings, including ensuring its complete exit from the United States.
U.S. Attorney General Merrick Garland made it clear that using new technology to break the law does not make one a disruptor, but a criminal. He said that companies must be held accountable for their actions and that the U.S. government will continue to pursue justice for those who violate the law.
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.
Zhao was perhaps best known as the chief rival to Sam Bankman-Fried, the founder of FTX, which was the second-largest crypto exchange before it collapsed last November. Bankman-Fried was convicted of fraud for stealing at least $10 billion from customers and investors.
In a federal court in Seattle on Tuesday, Zhao pleaded guilty 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.
Binance wrote in a statement that it made “misguided decisions” as it quickly grew to become the world’s biggest crypto exchange. The company acknowledged its “responsibility for historical, criminal compliance violations” in this settlement.
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 failed to file a single suspicious activity report on those transactions, and the company allowed more than 1.5 million virtual currency trades that violated U.S. sanctions, including ones involving Hamas’ al-Qassam Brigades, al-Qaida and other criminals.
The judge set Zhao’s sentencing for February 23, however, it is likely to be delayed. He faces a possible guideline sentence range of up to 18 months.
One of his attorneys, Mark Bartlett, noted that Zhao had been aware of the investigation since December 2020 and surrendered willingly even though the United Arab Emirates — where Zhao lives — has no extradition treaty with the U.S.
Zhao promised he would return to the U.S. for sentencing if allowed to stay there in the meantime. He said he wanted to take responsibility and close this chapter in his life, and that he wanted to come back.
The cryptocurrency industry has been marred by scandals and market meltdowns, and this settlement is a reminder that companies must be held accountable for their actions. Binance is now subject to five years of monitoring and “significant compliance undertakings,” and Zhao faces a possible guideline sentence range of up to 18 months.
The government’s actions demonstrate that it is serious about taking down bad actors in the cryptocurrency industry. This is a reminder to all companies and individuals that using technology to break the law will not be tolerated, and that they must take measures to ensure they are compliant with the law.
