Binance has agreed to a substantial $4.3 billion settlement with U.S. authorities following accusations of violating sanctions and money-transmitting laws. The Department of Justice (DOJ) unveiled the resolution on Tuesday, marking a significant move in the U.S. government's efforts to regulate the rapidly evolving crypto industry.
Changpeng "CZ" Zhao, the Founder and CEO of Binance, took a surprising turn by pleading guilty to charges during an arraignment in Seattle. Alongside his guilty plea, Zhao agreed to pay a hefty $50 million fine, further emphasizing the seriousness of the allegations against him and the exchange.
The charges against Binance, detailed in an unsealed court filing, include the failure to maintain a proper anti-money laundering program, operating an unlicensed money-transmitting business, and violating sanctions laws. Zhao's guilty plea extends to violating the Bank Secrecy Act and causing a financial institution to breach the BSA, as indicated in another filing. Notably, Zhao's fine will also contribute towards settling his obligations with the Commodity Futures Trading Commission (CFTC).
As part of the settlement, Binance is mandated to appoint an independent compliance monitor for a three-year period. The exchange must diligently report its compliance efforts to the U.S. government alongside paying the stipulated fines. Concurrently, Zhao faces a three-year prohibition from any involvement in operating or managing Binance, with the ban lifting only after the compliance monitor assumes duty.
The resolution of the Binance case adds another feather to the U.S. government's cap, demonstrating its regulatory prowess in dealing with major players in the cryptocurrency sphere. This development closely follows the conviction of FTX founder Sam Bankman-Fried on fraud and conspiracy charges related to his crypto exchange.
According to unsealed filings, Zhao allegedly prioritized Binance's growth, market share, and profits over compliance with U.S. banking regulations. His mantra of "Better to ask for forgiveness than permission" permeated Binance's operations, particularly in what Zhao referred to as the U.S. "Grey zone." The exchange's failure to collect "know-your-customer" information on users, driven by Zhao's growth-centric approach, exposed it to the risk of violating multiple U.S. laws, including sanctions rules.
In a move signaling a coordinated effort, the DOJ has announced a press conference today to unveil "significant cryptocurrency enforcement actions." The conference will feature key figures such as Attorney General Merrick Garland, Treasury Secretary Janet Yellen, Deputy Attorney General Lisa Monaco, and CFTC Chairman Rostin Behnam. Insiders suggest that this will be linked to the long-running investigation into Binance, shedding light on the broader implications of the settlement.
Bloomberg initially reported on the upcoming press conference, outlining the possibility of Binance settling with a $4 billion fine and a deferred prosecution agreement. Subsequently, Reuters confirmed the details of the DOJ's agreement with Binance, while The Wall Street Journal first reported Zhao's decision to step down.
The DOJ's investigation into Binance spans allegations of allowing individuals from sanctioned countries to operate on its platform, coupled with other regulatory concerns. This legal saga reached a new height when the CFTC filed a lawsuit against Binance earlier this year. In response to these developments, Binance's native BNB token experienced a notable 5.2% drop in value, reflecting the market's response to the uncertainties surrounding the exchange's future.
