Home » Crime and Fraud • US business news » Binance CEO Changpeng Zhao admits money laundering and will pay $4 billion fine

Binance CEO Changpeng Zhao admits money laundering and will pay $4 billion fine

By Nithya Bose in Crime and Fraud, posted November 22, 2023

Binance boss Changpeng Zhao, Binance, has pleaded guilty to money laundering violations.

The billionaire CEO of the world's largest cryptocurrency exchange will pay more than $4 billion in fines.

He could also face 10 years in jail, although the likely term could be lower.

This marks a pivotal moment aimed at bringing order to the often-lawless cryptocurrency industry.

Zhao, a prominent figure in the crypto space, will also step down as CEO and pay a fine of $200 million.

Binance has admitted to engaging in anti-money laundering activities, unlicensed money transmitting, and violations of sanctions.

US officials describe this settlement as the largest-ever corporate resolution involving criminal charges for an executive.

The investigation found Binance allowed illicit transactions on its platform.

It enabled activities from child exploitation and narcotics to financing terrorist organizations such as ISIS, Al Qaeda, and Hamas’s Al-Qassam Brigades.

With an estimated fortune exceeding $23 billion, Zhao pleaded guilty to failing to maintain an effective anti-money laundering program.

While he faces a maximum sentence of 10 years, the ultimate duration will likely be lower, with federal guidelines suggesting around 18 months.

Zhao has agreed to pay a $50 million fine and an additional $150 million in civil penalties as part of the plea deal.

Binance must pay back $1.35 billion of ill-gotten gains and pay a $1.35 billion civil monetary penalty to the Commodity Futures Trading Commission.

"Binance turned a blind eye to its legal obligations"

Janet Yellen, US Treasury Secretary, said: “Binance turned a blind eye to its legal obligations in the pursuit of profits.

“Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform.”

The guilty plea is a major move by US authorities, following the recent conviction of FTX co-founder Sam Bankman-Fried.

It sends a clear message to bad actors in the crypto industry.

Richard Teng, Binance’s global head of regional markets, will succeed Zhao as CEO.

Binance said: “While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance.

“Binance grew at an extremely fast pace globally… [and] made misguided decisions along the way. Today, Binance takes responsibility for this past chapter.”

Federal prosecutors accused the exchange of processing transactions for illicit services and laundering proceeds from darknet market activities, hacks, ransomware, and scams.

The charges include willful violations of anti-money laundering regulations and US economic sanctions.

This coordinated settlement involves various government agencies, including the Justice Department, FinCEN, OFAC, and the CFTC.

Largest enforcement action in Treasury's history

The case is the largest enforcement action in Treasury's history.

The legal troubles faced by Binance come amid increased scrutiny of the largely unregulated crypto industry.

While acknowledging the legitimacy of most crypto transactions, US officials reiterated their commitment to combatting illicit activities within the sector.

Binance claimed it isn't subject to US laws due to the lack of a physical headquarters.

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However, regulators have pursued civil cases against the exchange, accusing it of running an illegal exchange for unregistered securities.

The SEC's allegations included deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.

According to the Commodity Futures Trading Commission, Binance's assertion that its headquarters are wherever Zhao is reflects a deliberate attempt to avoid regulation.

The company faces accusations of violating US derivatives trading laws, including coaching VIP customers on evading compliance controls.

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In June, a Binance spokesperson said the firm takes SEC allegations seriously but believes they are unjustified.

The company said: “We respectfully disagree with the SEC’s allegations that Binance operated as an unregistered securities exchange or illegally offered and sold securities.

“Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a US regulatory tug-of-war.”

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