Binance and its CEO Zhao add to the (apparently) never-ending crypto woes.
After the trial and conviction of FTX’s Sam Bankman-fried, crypto enthusiasts thought that all was going to be well with the industry from now on, right? Wrong.
In the latest (and gravest) blow to the embattled crypto industry, the U.S. Department of Justice has brought criminal charges against Binance and its billionaire founder and CEO, Changpeng Zhao.
Zhao pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act.
The U.S. DOJ charges Binance of, among other things, of ‘knowingly and willfully’ caused the supply of services to Iran, in breach of U.S. sanctions.
“Binance chief Changpeng Zhao will plead guilty to criminal charges and step down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents. The plea arrangement with the government resolves a multi-year investigation into the world’s largest crypto exchange.
Zhao and others are charged with violating the Bank Secrecy Act by failing to implement an effective anti-money laundering program and for willfully violating 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’, according to the Justice Department.”
Binance and its founder were targets of a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department.
“Treasury Secretary Janet Yellen said in a release Tuesday the exchange allowed illicit actors to make more than 100,000 transactions that supported activities like terrorism and illegal narcotics. And it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.
It also allowed transactions associated with terrorist groups like Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda and ISIS, Yellen said in the release, noting Binance ‘never filed a single suspicious activity report’.”
Binance faces three criminal charges, including ‘conducting an unlicensed money-transmitting business’, ‘violating the International Emergency Economic Powers Act’, and a conspiracy charge.
It has agreed to forfeit $2.5 billion to the government, as well as to pay a fine of $1.8 billion.
“Binance has been the center of intense regulatory scrutiny over how it operates, with officials in multiple jurisdictions flagging concerns with the company’s gung-ho attitude to launching in certain markets even when it lacks the authority to do so, and allegations of involvement in illicit dealings such as money laundering and securities fraud.”
“The 32-page complaint includes three counts related to money laundering, conducting an unlicensed money-transmitting business, and sanctions violations. It includes wide-ranging allegations of Binance pursuing U.S. customers at the direction of Zhao while not complying with U.S. anti-money laundering and know-your-customer laws, as well as servicing customers in countries with sanctions restrictions, including Iran.”
A software developer for Bloomberg, Zhao went out to take his Binance to heights becoming the world’s largest crypto exchange.
“While Binance has made a public push to come into compliance in recent years, including hiring former Drug Enforcement Agency and Gemini veteran Noah Perlman as chief compliance officer, the exchange has not been able to shed its reputation for skirting the rules.
The Justice Department charges represent a culmination of the company’s failure to change minds in the U.S., and a possible end of its operations in a country increasingly hostile toward crypto.”
Former global head of regional markets, Richard Teng, will take over Binance as CEO, Zhao announced in a tweet on Tuesday.