Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, has resigned as CEO and pleaded guilty to violating anti-money laundering laws, marking a significant development in the ongoing US investigation into illicit financial activities within the crypto industry.
The United States Department of Justice (DoJ) announced on Tuesday that the settlement, involving multiple federal agencies, will impose fees exceeding $4 billion.
This development adds to the recent challenges facing the cryptocurrency industry, which has grappled with scandals and investigations exposing fraudulent conduct by key players and companies. Cryptocurrencies are also facing increased scrutiny as tools exploited by illicit groups to bypass global financial safeguards.
Zhao, a Canadian national, admitted guilt to one count of failing to maintain an effective anti-money laundering program. Attorney General Merrick Garland emphasized, “Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed. Now it is paying one of the largest corporate penalties in US history.”
The Justice Department has recently prosecuted CEOs of two major cryptocurrency exchanges in separate criminal cases, sending a clear message that leveraging new technology to break the law will result in criminal consequences, according to Garland.
Acting US Attorney Tessa Gorman for the western district of Washington outlined that Zhao’s operation of Binance without adequate anti-money laundering safeguards facilitated illegal transactions between US users and individuals in sanctioned jurisdictions. These transactions, involving countries such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine, generated significant profits for Binance through fees.
As part of the settlement, Binance is set to pay fees totaling $1.81 billion, forfeit $2.5 billion, and see personal payments from Zhao amounting to about $50 million. Zhao is also barred from any involvement with Binance, a Cayman Islands limited liability company, according to his plea agreement.
Treasury Secretary Janet Yellen condemned Binance’s willful negligence of legal obligations, stating, “Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.” Yellen emphasized that any institution benefiting from the US financial system must adhere to rules ensuring safety against terrorism, foreign adversaries, and crime, or face consequences.