CRYPTO CRIMINAL CAPITALI$M
Binance founder Changpeng Zhao strikes money-laundering plea deal
Court filing said as part of guilty plea Zhou agreed to pay $50m fine and step down from role as chief executive of the company
Edward Helmore in New York and agencies
Changpeng Zhao, founder of Binance, the world’s largest cryptocurrency exchange, agreed to plead guilty to money laundering violations on Tuesday, according to the court papers filed in federal court in Seattle.
The filing said as part of a guilty plea Zhou agreed to pay a $50m fine, step down from his role as chief executive of the company, and would be barred from any involvement in the business.
As part of its plea deal with the government, Binance too agreed to plead guilty, accept the appointment of a monitor and pay a criminal fine of nearly $1.81bn as well as a $2.51bn order of forfeiture to settle three criminal charges, including conducting an unlicensed money transmitting business, a conspiracy charge and violating the International Emergency Economic Powers Act.
The announcement is another huge blow for the cryptocurrency sector. The settlement with Binance comes less than a month after Sam Bankman-Fried was convicted on seven counts of fraud and conspiracy for his part in the collapse of FTX, a trading platform that had been second only in size to Binance. The FTX founder faces 115 years in prison when he is sentenced next year.
Changpeng Zhao, or CZ, played a significant role in FTX’s collapse. He was given the opportunity to look over FTX’s books shortly before it collapsed. But he declined to step in, and ensured the collapse of the smaller rival when he tweeted that Binance was dumping its position in FTX’s house token, FTT.
Changpeng Zhao and Bankman-Fried, though strikingly opposite in character and appearance, had both promised a rosy future for digital currencies that some predicted could replace sovereign currencies.
But financial regulators and prosecutors did not see it that way.
When charges against Bankman-Fried were announced in December of last year, the US attorney Damian Williams said the “phenomenal downfall” of the cryptocurrency exchange and the criminal charges that followed were “not a case of mismanagement or poor oversight, but of intentional fraud, plain and simple”.
Binance has been under justice department’s scrutiny since at least 2018, just one of a string of legal and regulatory headaches it faces in the US.
Federal prosecutors asked the company in December 2020 to provide internal records about its anti-money laundering efforts, along with communications Changpeng Zhao.
Financial regulator the Commodities Futures Trading Commission (CFTC) filed civil charges against Binance in March, alleging it failed to implement an effective anti-money laundering program to detect and prevent terrorist financing. Internally, Binance officers and employees acknowledged that the platform facilitated “potentially illegal activities”, the CFTC alleged.
In February 2019, Binance’s former chief compliance officer Samuel Lim received information on transactions by the militant Palestinian group Hamas on Binance, the CFTC wrote.
Zhao, a billionaire who was born in China and moved to Canada at the age of 12, said the CFTC’s “complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged”.
Binance CEO agrees to plead guilty, pay US$50 million fine
, Bloomberg
Binance Holdings Ltd.’s Chief Executive Officer Changpeng Zhao agreed to plead guilty to anti-money laundering charges and pay a US$50 million fine during a hearing in Seattle federal court Tuesday under a sweeping deal worked out with the U.S. Justice Department designed to keep the company operating.
Zhao agreed to step down as part of the settlement, which included the U.S. Treasury Department and the Commodity Futures Trading Commission, according to people familiar with the matter. Binance agreed to plead guilty to criminal charges and pay a $4.3 billion fine, according to people familiar with the matter. The deal ends a years-long investigation into the cryptocurrency exchange.
The government’s case against Binance was unsealed in federal court in Washington state Tuesday, as Zhao prepared to enter his plea. The company is charged with three counts, including money laundering violations, conspiracy to conduct an unlicensed money transmitting business, and sanctions violations.
BNB, a cryptocurrency tied to the Binance ecosystem, slipped about five per cent following the news. The token had hit a five-month high earlier in the day on the news that the DOJ would soon confirm its settlement with the exchange.
The filing states that from about August 2017 until October 2022 Binance and Zhao were involved in a “deliberate and calculated effort” to profit from the U.S. market without implementing controls required by law.
U.S. Attorney General Merrick Garland and Treasury Secretary Janet Yellen will hold a press conference at 3:00 pm ET on Tuesday to announce more details of the settlement.
The charges come as part of a settlement negotiated between the two sides that will resolve allegations of criminal wrongdoing ranging from money laundering and bank fraud to violations of sanctions. Bloomberg News reported the settlement on Monday.
The resolution against the world’s largest cryptocurrency exchange and its top leader represents one of the largest penalties imposed within the cryptocurrency industry, which has been facing withering scrutiny from the Justice Department, other government agencies and lawmakers.
Binance, which exploded onto the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge to more than 60 per cent worldwide after the fall of FTX in November 2022. Since then, its combined market share for spot crypto and derivatives has declined to less than 44 per cent this month, according to researcher CCData.
The Justice Department recently prosecuted FTX co-founder Sam Bankman-Fried in New York for allegedly orchestrating a multibillion-dollar misappropriation of customer funds that led to the cryptocurrency exchange’s collapse. Bankman-Fried was convicted on fraud on conspiracy charges following a trial.
Both the CFTC and U.S. Securities and Exchange Commission have sued Binance and Zhao alleging a range of violations, including mishandling customer funds and allowing Americans to illegally access the platform.
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