Binance chief Changpeng Zhao stepped down and pleaded guilty to breaking U.S. anti-money laundering laws as part of a $4.3 billion US settlement resolving a years-long probe into the world’s largest crypto exchange, prosecutors said on Tuesday.
The deal, which will see Zhao personally pay $50 million US, was described by prosecutors as one of the largest corporate penalties in U.S. history. It is another blow to the crypto industry that has been beset by investigations and comes on the heels of the recent fraud conviction of FTX founder Sam Bankman-Fried.
But several legal experts said it was a good outcome for Zhao, leaving his vast wealth intact and allowing him to retain his stake in Binance, the exchange he founded in 2017.
Binance broke U.S. anti-money laundering and sanctions laws and failed to report more than 100,000 suspicious transactions with organizations the U.S. described as terrorist groups, including Hamas, al-Qaeda and the Islamic State of Iraq and Syria, authorities said.
Front Burner23:35Binance and its Canadian CEO sued in major crypto case
Featured VideoThe biggest crypto exchange in the world is being sued by an American regulator accusing Binance and its Canadian billionaire founder of breaking a string of laws and misusing investor funds. Changpeng Zhao and his company say they will fight back “vigorously.” Today on Front Burner, Jacob Silverman, who you may know from our podcast The Naked Emperor, joins us to talk about what all this means for crypto’s future. For transcripts of this series, please visit: https://www.cbc.ca/radio/frontburner/transcripts
Failed to report
The exchange also never reported transactions with websites devoted to selling child sexual abuse materials and was one of the largest recipients of ransomware proceeds, they said.
“Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges,” U.S. Attorney General Merrick Garland said on Tuesday. “Binance also did more than just fail to comply with federal law. It pretended to comply.”
Some of the charges, which are both criminal and civil, relate to practices that Reuters reported first in a series of articles in 2022.
The Justice Department, which negotiated the settlement with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, is seeking an 18-month prison sentence for Zhao, the maximum suggested under federal guidelines, the New York Times reported.
Binance’s former chief compliance officer Samuel Lim was charged by the CFTC, the agency said. Neither Lim nor his lawyers responded to requests for comment.
Binance will pay $1.81 billion US within 15 months, and a further $2.51 billion US forfeiture as part of the deal, prosecutors said.
Zhao, a billionaire, was born in China and moved to Canada at the age of 12. He pleaded guilty in a Seattle court on Tuesday afternoon.
New chief executive
“Today, I stepped down as CEO of Binance,” Zhao said on social media after the settlement was announced. “Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.”
While authorities have probed Zhao and Binance for years, Zhao’s exit marks a dramatic development for one of the most powerful figures in the crypto industry, and for Binance. The deal raises questions over the future of the crypto exchange, which he has tightly controlled.
Richard Teng, a longtime Binance executive, will take over at Binance, Zhao said in his post.