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Velimir Velichkov November 22, 2023 3 min read
Binance and CZ Plead Guilty to Money Laundering
The company and its founder and CEO, Changpeng Zhao, agreed to pay a financial penalty to settle an investigation that alleged breaches of US financial laws
The world’s largest cryptocurrency exchange, Binance Holdings Limited, and its founder and CEO, Changpeng Zhao, pleaded guilty to violating anti-money laundering regulations in the United States, the US Attorney’s Office, Western District of Washington announced Tuesday. The guilty plea seeks to resolve an investigation by the Justice Department into violations of the International Emergency Economic Powers Act (IEEPA) and the Bank Secrecy Act (BSA).
Overall, Binance agreed to pay more than $4 billion to resolve the investigation. In light of the guilty plea, the company’s CEO and founder resigned from his CEO role. Court documents reveal that Zhao pleaded guilty to violation of the BSA, as well as failure to ensure an effective anti-money laundering (AML) program.
The coordinated efforts of the US Commodity Futures Trading Commission, the Office of Foreign Assets Control and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) resulted in one of the largest corporate resolutions that includes criminal charges.
The 2017-founded cryptocurrency exchange quickly became one of the largest companies in that sector thanks to its US-based customers. Serving US customers, Binance was required to register with FinCEN as a money services business. Additionally, considering that the cryptocurrency exchange served US customers, it had to comply with the US laws that required the development of a robust AML framework.
Allegations against Binance claim the company failed to implement effective AML controls, designating it as vulnerable to money laundering. Janet L. Yellen, the Secretary of the Treasury, explained that the cryptocurrency exchange neglected its legal obligations and focused on profits. Moreover, she claimed that Binance and its “willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
The Financial Penalty Is One of the Largest for the Corporate Sector in the US
Under the guilty plea agreement, Binance agreed to forfeit some $2.51 billion. According to court documents, the cryptocurrency exchange also agreed to pay a criminal fine of $1.81 billion, making the total penalty against it a staggering $4,316,126,163.
Under the guilty plea, Binance agreed to undergo independent compliance monitoring. This process will last three years while the company also agreed to improve its AML framework. In other words, despite the penalty and scrutiny, Binance will continue to operate.
On the other hand, Zhao, who is estimated to have a fortune of more than $23 billion, would also be subject to a hefty $200 million financial penalty. Besides a $50 million fine, the former CEO of the largest cryptocurrency exchange will also pay $150 million in civil penalties.
“In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.“Merrick B. Garland, Attorney General
Attorney General Merrick B. Garland revealed that Binance was able to become the largest cryptocurrency exchange partly because of its violations of the established regulations. He added that the company is now subject to one of the largest corporate penalties in the United States.
Garland spoke about the Justice Department’s recent success in prosecuting CEOs from two of the largest cryptocurrency exchanges in the world. Finally, he said that those actions send a clear message that the Justice Department is prepared to fight bad actors that use technology to break the laws.