What crimes did Binance plead guilty to and how big was the fine?
A years-long US investigation into Binance has resulted in a $4.3 billion settlement and the crypto firm’s CEO Changpeng Zhao stepping down.
The US Department of Justice announced on Tuesday that the world’s largest cryptocurrency exchange, Binance, and its CEO Changpeng Zhao have pleaded guilty to engaging in anti-money laundering, unlicensed money transmitting and violating sanctions laws. “Binance willfully failed to report well over 100,000 suspicious transactions that it processed as a result of its deficient controls, including transactions involving terrorist organizations, ransomware, child sexual exploitation material, frauds, and scams,” the Treasury Department said in a statement.
The settlement for $4.3 billion, one of the largest in US history, “reflects the egregious nature of Binance’s conduct, the high volume of its transactions, and senior management’s involvement.” The agreement will resolve the criminal charges and Zhao, who founded the company in 2017, has agreed to step down. He will personally pay a fine of $50 million and be barred from all involvement with Binance.
Binance under investigation since at least 2018
Reuters reported last year that prosecutors at the Department of Justice have been looking into potential crimes committed by Binance since at least 2018. They were focused on the cryptocurrency exchange’s compliance with anti-money laundering laws potentially aiding individuals violating sanctions.
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Tessa M. Gorman Acting US Attorney for the Western District of Washington in a statement.
She added that “Zhao knowingly operated a financial platform without basic anti-money laundering safeguards.” This allowed illegal transactions between users in the US and those in sanctioned jurisdictions like Cuba, Iran, Syria and Russian-occupied regions of Ukraine giving sanctioned customers “unfettered access to American capital and financial services.”
The company profited handsomely from those transactions collecting approximately $1.35 billion in trading fees from US customers.
One of the ways that Binance helped user circumvent internal controls was by suggesting that they use virtual private networks which allowed them to bypass geofencing controls that would block access to carry out unlawful transactions. In a little over five years, between August 2017 and October 2022, over 1.67 million currency trades were executed by Binance between the US individuals and blocked persons as well as users in sanctioned jurisdictions.