Get Informed, Stay Inspired

A major cryptocurrency platform has been penalized $4 billion for enabling money laundering, with the CEO admitting guilt.
Economy Technology

A major cryptocurrency platform has been penalized $4 billion for enabling money laundering, with the CEO admitting guilt.

The United States government inflicted a significant setback on Binance, the biggest digital currency exchange globally. On Tuesday, its founder and CEO Changpeng Zhao admitted to a felony charge for not stopping money laundering on the site and agreed to a settlement of approximately $4 billion.

Zhao resigned from his position as the CEO of the company, and Binance acknowledged breaking the Bank Secrecy Act and potentially violating sanctions programs. This included their failure to establish proper reporting procedures for suspicious transactions.

US Attorney General Merrick Garland stated that utilizing modern technology to violate the law does not classify as being a disruptor, but rather as a criminal act. He also announced that the resolution of the case resulted in one of the biggest financial punishments for a corporation in the country’s past.

Under the terms of the settlement, the U.S. Treasury has stated that Binance will undergo a five-year monitoring period and must adhere to strict compliance measures, which include ensuring Binance’s complete withdrawal from the United States. Binance is registered as a limited liability company in the Cayman Islands.

The world of cryptocurrency has been plagued by controversies and financial collapses.

FTX founder’s opponent

Zhao was widely recognized as the primary competitor to Sam Bankman-Fried, the 31-year-old creator of FTX. Prior to its downfall in November, FTX held the rank of second-largest cryptocurrency exchange. Bankman-Fried was recently found guilty of fraudulent activity, having embezzled a minimum of $10 billion from clients and backers.

On Tuesday, in a federal court in Seattle, Zhao admitted guilt to failing to uphold an efficient anti-money-laundering program.

The plea agreement was discussed with Zhao by Magistrate Judge Brian A. Tsuchida, who wanted to ensure that he fully comprehended it. At one point, Tsuchida stated, “You were aware that you did not have any controls in place.”

“Affirmative, Your Honor,” he responded.

According to a statement from Binance, the company acknowledges its “misguided decisions” as it rapidly expanded to become the largest cryptocurrency exchange in the world. The settlement also recognizes the company’s responsibility for past violations of criminal compliance.

According to U.S. Treasury Secretary Janet Yellen, Binance facilitated transactions by unlawful individuals, enabling various illegal activities such as child sexual abuse, drug trafficking, and terrorism through over 100,000 transactions.

According to Yellen, Binance failed to report any potentially suspicious activities related to these transactions, and also permitted over 1.5 million trades of virtual currency that violated U.S. sanctions, including those involving Hamas’ al-Qassam Brigades, al-Qaida, and other criminal organizations.

The sentencing for Zhao, set by the judge, is scheduled for February 23, but it may be postponed. He could possibly receive a sentence of up to 18 months based on guidelines.

Mark Bartlett, one of Zhao’s lawyers, pointed out that Zhao had knowledge of the investigation as early as December 2020. Despite the fact that the United Arab Emirates, where Zhao resides, does not have an extradition treaty with the U.S., he voluntarily surrendered.

Bartlett stated that the individual made the decision to come to this location and accept the outcomes. The individual is currently present and has admitted to his guilt.

Zhao, who has a spouse and young kids in the UAE, assured that he would come back to the U.S. for his sentencing if given permission to stay there in the interim.

Zhao expressed a desire to take accountability and move on from this phase of their life. They also stated a wish to return, as evidenced by their presence today.

The company transferred investment assets to a third-party entity.

Previously, Zhao was accused of misusing customer funds and hiding the fact that the company was mixing billions of dollars of investor assets and transferring them to another company owned by Zhao.

During the summer, Binance faced allegations of functioning as an unregistered securities exchange and breaking various U.S. securities laws in a lawsuit filed by regulators. This lawsuit mirrored findings made after the downfall of FTX.

Zhao and Bankman-Fried were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019. However, the relationship between the two deteriorated, culminating in Zhao announcing he was selling all of his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.

During the trial and in subsequent public statements, Bankman-Fried attempted to shift the responsibility onto Binance and Zhao for supposedly organizing a bank run on FTX.

The jury has convicted Bankman-Fried of wire fraud and multiple other offenses. His sentencing is scheduled for March and he could potentially receive a lengthy prison term.