Crypto exchange Binance’s agreed to plead guilty to criminal charges and pay a $4.3 billion (€3.93 billion) fine, according to people familiar with the matter. The deal ends a years-long investigation into the cryptocurrency exchange.
In addition, chief executive Changpeng Zhao pleaded guilty to anti-money laundering violations and agreed to pay a $50 million fine on Tuesday under a sweeping deal worked out with the US Justice Department designed to keep the company operating.
Zhao agreed to step down as part of the settlement, which included the US Treasury Department and the Commodity Futures Trading Commission, according to people familiar with the matter.
In a charging document unsealed on Tuesday, Binance was charged with three counts, including money laundering violations, conspiracy to conduct an unlicensed money transmitting business, and US sanctions violations. Binance allowed at least 1.1 million transactions, worth more than $898 million, involving customers in Iran, according to the court filing.
The settlement negotiated between the two sides will resolve allegations of criminal wrongdoing.
Binance chose to “prioritise growth over compliance with US legal requirements,” allowing it to conduct billions of dollars in transactions without gathering required information on customers or monitoring transactions, the US said.
BNB, a cryptocurrency tied to the Binance ecosystem, slipped about 5% following the news. The token had hit a five-month high earlier in the day on the news that the DOJ would soon confirm its settlement with the exchange.
The Justice Department accused the company – as well as top executives, including Zhao – of taking steps to conceal that it was dodging US laws. The filing states that from about August 2017 until October 2022, Binance and Zhao were involved in a “deliberate and calculated effort” to profit from the US market without implementing controls required by law.
Binance “chose not to comply with US legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain US users,” according to the charging document.
Binance and its senior managers, from the company’s inception, tracked and monitored the user growth in the US, according to the complaint, which included a company graphic from 2017 that showed more than 23 per cent of Binance’s users were from the US – a larger share than any other country.
The government said Zhao was well aware of the presence of US customers on the international exchange, writing in 2019 that if Binance blocked US customers from day one it “will be not as big as we are today.”
Zhao wrote that it was “better to ask for forgiveness than permission” and described the situation as a “grey zone.”
Zhao faces a maximum sentence of 10 years and fines up to $500,000, plus any profits he made from the alleged scheme. His lawyers said in court on Tuesday that his sentencing will be delayed by six months. Zhao’s agreement includes a waiver of his right to appeal, provided that his sentence doesn’t exceed 18 months, according to Judge Brian Tsuchida said during the plea hearing.
The resolution against the world’s largest cryptocurrency exchange and its top leader represents one of the largest penalties imposed within the cryptocurrency industry, which has been facing withering scrutiny from the Justice Department, other government agencies and lawmakers.
Binance, which exploded on to the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge to more than 60 per cent worldwide after the fall of FTX in November 2022. Since then, its combined market share for spot crypto and derivatives has declined to less than 44 per cent this month, according to researcher CCData.
The Justice Department recently prosecuted FTX co-founder Sam Bankman-Fried in New York for allegedly orchestrating a multibillion-dollar misappropriation of customer funds that led to the cryptocurrency exchange’s collapse. Bankman-Fried was convicted of fraud following a trial.
Both the CFTC and Securities and Exchange Commission have sued Binance and Zhao alleging a range of violations, including mishandling customer funds and allowing Americans to illegally access the platform. – Bloomberg
