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Binance Chief Executive Changpeng Zhao has resigned after pleading guilty to a US criminal charge for failing to protect against money laundering, after federal prosecutors unsealed a sweeping case against the largest cryptocurrency exchange in the world.
The crypto site also pleaded guilty to a series of criminal charges related to money laundering and violating international financial sanctions, agreeing to pay more than $4.3 billion in fines, authorities announced Tuesday American.
In five years, Binance has grown from a start-up to an exchange giant with employees in dozens of countries. As of November 2022, it controlled more than half of the crypto market.
Yet its success remained a secret for years: the company insisted it had no headquarters and had countless run-ins with regulators around the world.
The crypto sector’s links to terrorism financing have come under scrutiny following Hamas’ attack on Israel last month. Following the attack, Israel closed more than 100 Binance accounts, the FT reported.
The U.S. Treasury Department said Tuesday that the exchange failed to report “well over 100,000 suspicious transactions” linked to ransomware attacks, child sexual abuse, large-scale hacks, narcotics and terrorist groups, including Al-Qaeda and Isis.
“Partly because of the crimes committed, Binance has become the largest cryptocurrency exchange in the world,” said US Attorney General Merrick Garland. “Today, Binance paid one of the largest corporate penalties in U.S. history.”
Zhao, one of the crypto industry’s most outspoken and influential executives, entered the plea Tuesday in federal court in Seattle and also agreed to pay a $50 million fine. “I made mistakes and I have to take responsibility for them,” he said on social media platform X, where he claimed to have resigned.
Richard Teng, who was previously global head of regional markets at Binance, will replace Zhao as CEO.
The US Department of Justice created a new unit in 2021 focused on the misuse of digital assets for criminal purposes, as Joe Biden’s administration became one of the jurisdictions with the toughest stance in the world on the matter. of cryptography.
“Using new technology to break the law does not make you a disruptor,” Garland said Tuesday. “That makes you a criminal.”
Tuesday’s agreements also resolve a case brought by the Commodity Futures Trading Commission, which in March accused Binance and Zhao of operating illegally in the United States. The CFTC’s civil complaint alleged that much of the group’s reported trading volume and profitability came from “extensive solicitation and access” to U.S. customers, contradicting the exchange’s claims.
In June, the U.S. Securities and Exchange Commission filed 13 civil charges accusing Binance of violations, including mixing billions of dollars of customer cash with a separate trading company owned by its chief executive and operating exchanges , unregistered brokers and clearing agencies. The SEC was not named in the resolutions announced Tuesday and declined to comment.
Binance admitted to combating money laundering, transmitting money without a license and violating sanctions, authorities said. The alleged misconduct occurred at least between August 2017 and October 2022, according to court filings.
Mark Kornfeld of law firm Buchanan Ingersoll and Rooney said: “The DoJ’s action against the major player in crypto is a very important development for this industry as a whole. This is proof that this is the new normal, and not just a random development for the industry, everyone is pretty well informed that this is how things are going to be.
In its March lawsuit, the CFTC also alleged that Binance knowingly facilitated potentially illegal activities. In one case in 2019, Binance received information “regarding Hamas transactions.” A Binance employee reportedly dismissed the risk and said “can barely buy an AK-47 with $600.”
A year later, the CFTC said a Binance executive said some customers — including some Russians — were “here for crime.” A colleague reportedly replied: “We see the evil, but we close our eyes. »
Additional reporting by James Politi in Washington