Earlier this month, Global RADAR reported on what appears to be the final chapter in the collapse of once-prominent crypto exchange FTX. The saga ended in company CEO and co-founder Sam Bankman-Fried being convicted on multiple counts of money laundering and securities and wire fraud, with a man once heralded as a visionary in the crypto-space now facing a maximum sentence of 110 years in prison. Another domino fell in the cryptocurrency sector last week as Binance – the world’s largest cryptocurrency exchange – saw its own disgraced founder and CEO Changpeng Zhao step down after pleading guilty to federal money laundering charges. The move comes as part of a greater coordinated settlement with the U.S. Justice Department and other domestic regulators that will ultimately see Binance pay over $4 billion in penalties for multiple violations of the U.S. Bank Secrecy Act (BSA), failing to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).¹

Court documents revealed that Binance had placed a priority on growth and revenue over compliance with U.S. law since its very beginnings. The company admitted that since 2017 they had deliberately avoided appropriately vetting thousands of their clients as required by current U.S. and global anti-money laundering regulations. The company also prioritized customers seeking to engage in high-volume transactions, and while many of these individuals were based in the United States, this also opened the door for foreign funds of questionable origins to flood the space. This included trading activity on behalf of nations currently facing U.S. sanctions, including Iran. The DOJ discovered that Binance failed to implement the core components of an effective AML program as it lacked comprehensive know-your-customer (KYC) protocols and the ability to systematically monitor transactions. These deficiencies effectively allowed users to open accounts and complete trillions of dollars’ worth of trades without screening any of their personal identification information with the exception of email addresses. The firm was also found to have never filed any suspicious activity reports (SAR’s) with FinCEN, failing to identify and report on over 100,000 transactions that may have been linked to nefarious activities such as ransomware attacks, human and sex trafficking, and the funding of terrorism between August of 2017 and October 2022.

“Binance turned a blind eye to its legal obligations in the pursuit of profits,” Treasury Secretary Janet Yellen said in a statement. “Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform.”²

All told, Binance’s consent orders were executed by the Financial Crimes Enforcement Network (FinCEN) and Commodity Futures Trading Commission, along with the Office of Foreign Assets Control (OFAC) and the United States Justice Department. The penalty is considered “historic” due to the collective $4.3 billion total of combined fines and restitution payments that will ultimately be made to the U.S. government. As part of their respective settlement, Binance will now be under supervision from a government-approved third-party monitor that will oversee their transactions and clients moving forward. As part of his guilty plea, Zhao faces between 18 months and up to 10 years in prison and also agreed to pay a $50 million fine, though prosecutors are keeping open the possibility of asking for a stiffer penalty, according to senior Justice Department officials.³ This is due in large part to the fact that Zhao’s net worth sits at a whopping $20+ billion, making a million-dollar fine nothing more than a drop in the bucket for a man of his financial stature. Zhao will also officially be barred from any involvement with the company he created for at least three years until after the aforementioned monitor is appointed. Richard Teng, previously the company’s global head of regional markets, will take over as CEO.

“Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges,” U.S. Attorney General Garland said on Tuesday. “Binance also did more than just fail to comply with federal law. It pretended to comply.”

Citations

1. “Binance and CEO Plead Guilty to Federal Charges in $4B Resolution.” Office of Public Affairs | Binance and CEO Plead Guilty to Federal Charges in $4B Resolution | United States Department of Justice, 21 Nov. 2023. 
2. Egan, Matt, et al. “CEO of World’s Largest Cryptocurrency Exchange Pleads Guilty to Money Laundering Violations | CNN Business.” CNN, Cable News Network, 21 Nov. 2023. 
3. Yaffe-bellany, David, et al. “Binance Founder Pleads Guilty to Violating Money Laundering Rules.” The New York Times, The New York Times, 21 Nov. 2023.