As part of a $4.3 billion deal with the Department of Justice, Binance CEO Changpeng Zhao will resign from his position and enter a guilty plea, according to court filings.
The plea deal with the authorities ends a multi-year probe into the biggest cryptocurrency exchange globally.
In addition to knowingly breaking U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” Zhao and others are accused of breaking the Bank Secrecy Act by neglecting to put in place an effective anti-money laundering programme, according to the Justice Department.
According to the plea deal, the former CEO of Binance would admit guilt directly to breaking the Bank Secrecy Act and inciting a financial institution to do the same. Additionally, the DOJ is proposing that Zhao be fined $50 million by the court.
The case against Binance, which was made public on Tuesday afternoon, reveals that the exchange is being prosecuted on three counts of felonies: conspiracy, operating an unregistered money transmission business, and breaking the International Emergency Economic Powers Act.
Binance has consented to pay a $1.8 billion fine in addition to forfeiting $2.5 billion to the government.
The accusations come after the Securities and Exchange Commission and the Commodity Futures Trading Commission filed civil lawsuits earlier this year.
Binance has been under intense regulatory scrutiny for its business practises. Regulators from various jurisdictions have expressed concerns about the company’s eagerness to enter markets even though it lacks the necessary authority, and there have been claims of the company’s involvement in money laundering and securities fraud.
In June, the Securities and Exchange Commission filed a massive complaint against the company, claiming that Binance was operating an unlicensed securities exchange and mismanaging investor funds.
Shortly after, the SEC sued Coinbase, a competing exchange, claiming it was acting as an unlicensed broker, clearinghouse, and securities exchange.
Additionally, the SEC filed a lawsuit against Kraken this week, alleging that the exchange mixed $33 billion in cryptocurrency assets owned by its customers with assets belonging to the corporation, putting its consumers at serious risk of losing a sizable amount of money.
In the 13 charges brought against Binance by the SEC, the agency accused Binance of commingling billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now-bankrupt crypto exchange FTX. SEC Chair Gary Gensler added, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
In only a few short weeks after being founded in 2017 by an entrepreneur of Chinese descent, Binance quickly rose from obscurity to prominence in the cryptocurrency space. Even now, Binance continues to be the biggest cryptocurrency exchange in the world, with annual trade volume in the billions of dollars.The exchange adopted a bold strategy for expansion, quickly and frequently extending its reach throughout the world without prior authorization.
Although Binance’s parent company is headquartered in the Cayman Islands, Zhao has repeatedly rejected requests for Binance to establish a single worldwide headquarters, stating that he prefers the platform to function under a “decentralised” operational model.
The U.K. Financial Conduct Authority banned Binance’s U.K. subsidiary from conducting business there in 2021, citing lack of authorization for regulated activities.
More recently, Binance abandoned efforts to apply for a full licence in the United Kingdom when the regulator determined that its anti-money laundering and know-your-customer procedures were insufficient.
Binance, Zhao, and the company’s former CFO, Samuel Lim, were accused by the CFTC of running a “sham” compliance programme, operating a “illegal” exchange, and breaking laws “designed to prevent and detect money laundering and terrorism financing” in addition to other violations of the Commodity Exchange Act.
In July, Binance and Zhao submitted a move to have the CFTC lawsuit dismissed. In response to the SEC’s complaint, the exchange’s U.S. division has filed a protective injunction against what they refer to as the SEC’s “fishing expedition.”
The ramifications of the agency’s assault on cryptocurrency for various tokens and blockchains, not just exchanges, are of particular worry for the crypto industry.
Some of the tokens that Binance and Coinbase sell on their exchanges, such Solana’s sol, Cardano’s ada, and Polygon’s matic, are allegedly securities that ought to have been registered with the SEC, according to the agency.
CNBC
