Binance: Prosecutors characterized the agreement, which called for Zhao to pay $50 million personally, as one of the biggest corporate fines in US history.
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Binance CEO Changpeng Zhao resigns
As part of a $4.3 billion settlement that ends a years-long investigation into the largest cryptocurrency exchange in the world, Binance CEO Changpeng Zhao resigned and entered a guilty plea to violating US anti-money laundering rules, according to authorities on Tuesday. Verified.
Prosecutors characterized the agreement, which called for Zhao to pay $50 million personally, as one of the biggest corporate fines in US history. This is yet another setback for the crypto business, which has been under intense scrutiny following the recent fraud conviction of Sam Bankman-Fried, the creator of FTX.
Nonetheless, several legal experts claimed that Zhao was fortunate to have his enormous riches preserved and to be able to keep his ownership in Binance, the exchange he launched in 2017.
Authorities claim that Binance
Violated US anti-money laundering and sanctions rules and neglected to disclose over 100,000 suspicious transactions with entities the US has designated as terrorists, such as the Islamic State of Iraq and Syria, Hamas, and al Qaeda. Slept.
According to him, the exchange was one of the main recipients of ransomware revenue and never disclosed any transactions with websites that sold materials about child sexual assault.
U.S. Attorney General Merrick Garland stated on Tuesday that “Binance makes it easier for criminals to transfer their stolen funds and illicit earnings to its exchange.” “Binance did more than only break the law at the federal level. It appeared to comply.”
A portion of the charges—both criminal and civil—have to do with actions that Reuters originally covered in a string of pieces back in 2022.
The New York Times writes that the Justice Department, which mediated the agreement with the Treasury Department and the Commodity Futures Trading Commission (CFTC), is requesting an 18-month prison sentence for Zhao, which is less than what is advised by federal guidelines. is the harshest penalty possible.
The CFTC
Announced that it had charged Samuel Lim, the former chief compliance officer of Binance. Requests for comments were not answered by Lim’s attorneys or himself.
Prosecutors claimed that as part of the agreement, Binance would lose $2.51 billion and pay $1.81 billion in 15 months.
Born in China, billionaire Zhao immigrated to Canada when he was twelve years old. In a Seattle court on Tuesday afternoon, he entered a guilty plea.
Following the announcement of the deal, Zhao posted on social media, saying, “Today, I step down as CEO of Binance.” Leaving was indeed emotionally difficult. However, I am aware that this is the correct course of action. I have to own up to my mistakes and accept responsibility. For myself, Binance, and our community, this is the best course of action.
Although the government has investigated Zhao and Binance for years, Zhao’s departure is a significant step for Binance, one of the most influential people in the cryptocurrency space. The transaction casts doubt on the cryptocurrency exchange’s long-term viability given its strict controls.
According to Zhao’s statement, Binance’s veteran executive Richard Teng will take the helm.
“These resolutions acknowledge our company’s responsibility for historic, criminal compliance violations and allow our company to turn the page,” Binance stated in a statement.
Teng declared in a different statement that his main goal would be “to reassure users that they can be confident in the company’s financial strength, safety, and security.”
Zhao keeps his share in Binance.
Although the penalties are substantial, Yasha Yadav, a law professor at Vanderbilt University, said it seems doable for Binance.
He stated, “This deal looks to be designed to remove CZ from the development of a business model that is intrinsically linked while giving Binance a chance to live another day.”
Zhao might still be able to influence Binance because it looks like he’s holding onto his shares, according to Yadav.
Zhao is worth $10.2 billion, per Forbes.
Robert Frenchman of Mucassey Frenchman LLP stated that Zhao “has come out of it looking pretty good” considering the seriousness of the breaches and the individuals involved, therefore it’s likely that the US authorities had to persuade him to visit the nation.
“His assets are still enormous,” French stated. “He won’t likely be incarcerated in the US for a long period. He continues to possess stock in Binance, a business that has recently resolved several of its most significant legal problems.”
Former federal prosecutor and assistant professor at Boston College Law School Jeffrey Cohen stated that prosecutors probably considered Zhao’s advantages against the chance that he might not have turned himself in otherwise and decided to give Binance a bigger payment. To persuade was the desire.
“If you can get good numbers for corporate fines and the cost is that individual defendants take slightly lower fines, the government makes that calculation,” Cohen stated.
“Possibly unlawful”
One of the many legal issues Binance has in the US is that it has been the subject of a Justice Department investigation since at least 2018, according to a Reuters story from last year.
In December 2020, emails about Zhao as well as internal documents concerning the company’s anti-money laundering initiatives were requested by federal prosecutors from the company.
The CFTC filed civil charges against Binance in March, alleging that the business had failed to implement a trustworthy anti-money laundering system that would have recognized and prevented the financing of terrorism.
The CFTC said that executives and staff at Binance admitted internally that the platform supported “potentially illegal activities.”
The CFTC stated that in February 2019, Lim was notified of transactions on Binance that were made by the terrorist Hamas group in Palestine.
The CFTC alleged in its March lawsuit that “Lim, a Singaporean, told a colleague that terrorists usually send ‘ small sums’ because ‘large sums are money laundered.”
Former federal prosecutor and partner at Buchalter Law Group Daniel Silva stated that the accusations may be sufficient to bring charges against Zhao for crimes carrying heavier punishments, like money laundering or fraud.
“He was at risk of facing much more serious charges and so this offer is very favourable to him,” Silva stated.
Even yet, it is uncommon for a firm’s CEO to enter a guilty plea; this highlights the Justice Department’s efforts to prosecute executives under Democratic leadership.
As far as personal liability is concerned, the government is pushing hard, according to Kit Edelman, a partner at the Dallas law firm Haynes Boone.
He referred to the financial aspect of the transaction as “shocking,” saying that the scale of the fine indicates that the US government wishes to regulate the cryptocurrency industry.