Billionaire Binance CEO Changpeng Zhao and Binance, a leading cryptocurrency exchange, pled guilty to federal charges on Tuesday in a significant move aimed at regulating the often-chaotic crypto industry.
According to CNN, Binance, the largest crypto exchange globally, admitted to violations, including anti-money laundering, unlicensed money transmission, and sanctions breaches. Meanwhile, Zhao, with an estimated fortune exceeding $23 billion, pled guilty to neglecting an effective anti-money laundering program.
In a comprehensive settlement with federal authorities, Binance agreed to pay over $4 billion in fines and penalties, and Zhao consented to resign as CEO of the exchange he established and pay a $200 million fine.
On X, Zhao confirmed his resignation as Binance CEO, acknowledging the difficulty of this decision and accepting responsibility for his errors. He announced that Richard Teng, formerly Binance’s Global Head of Regional Markets, has been appointed as the new CEO.
According to CNN, Zhao faces a maximum of 10 years in prison but is likely to get a lesser sentence, with federal guidelines suggesting around 18 months. A judge will decide the final sentence.
In a recent blog post, Binance announced the resolution with U.S. regulators, acknowledging past compliance failures. The company has since restructured, focusing on enhanced compliance, security, and user safety. The new CEO has over three decades of financial services and regulatory experience.
Investigation Reveals Binance’s Role in Facilitating Illicit Transactions
Authorities, following a prolonged investigation, charged Binance with allowing illicit transactions on its platform, facilitating offenses from child sex abuse and drug trafficking to funding terrorist groups like ISIS, Al Qaeda, and Hamas’s Al-Qassam Brigades.
U.S. authorities discovered over 100,000 transactions on Binance involving illicit activities and over 1.5 million virtual currency trades breaching U.S. sanctions, including those on Iran, Syria, and Cuba. According to the prosecutors, Binance deliberately profited from the U.S. market without adhering to required controls, starting as early as August 2017 and involving various company officials.
In fact, a message sent by a compliance employee in February 2019, uncovered during the investigation into Binance, said that the crypto exchange should get a banner that says:
Is washing drug money too hard these days? Come to Binance, we got cake for you.
U.S. Scrutiny on Crypto Sector Leading to Major Downfalls
Binance’s troubles are reminiscent of the downfall of another crypto firm, FTX, whose founder was found guilty of fraud.
The conviction of Sam Bankman-Fried marked a pivotal moment in the cryptocurrency industry, highlighting its vulnerabilities despite claims of transparency and decentralization. This industry, often operating outside strict regulatory oversight, is now facing serious scrutiny – and Binance’s issues shed an even brighter light on the vulnerabilities of crypto.
Even with this attention, groups involved in illegal activities, like hackers in Russia and money launderers in North Korea, still use cryptocurrency in their operations. They often use publicly accessible “mixing services” to hide where their money comes from.
The U.S. government is taking strong steps to stop these crimes related to cryptocurrency. In August 2022, they charged the creators of a service called Tornado Cash, accusing them of helping criminals launder around $7 billion of cryptocurrency stolen in scams and cybercrime.
In summary, the recent legal issues of billionaire Binance CEO Changpeng Zhao and his company, and the conviction of Sam Bankman-Fried, mark big changes for the world of cryptocurrency. These events show that U.S. authorities are now keeping a closer eye on this industry, which has often lacked strict regulation. As the crypto industry grows and changes, these actions by the authorities will play a key role in shaping its future, focusing on security and trust for everyone involved.