Binance Pleads Guilty to Money Laundering, Faces Over $4 Billion in Fines

Tom Ozimek
By Tom Ozimek
November 21, 2023Business News

Changpeng Zhao, the founder of the world’s biggest cryptocurrency exchange Binance, pleaded guilty to money-laundering charges and agreed to step down and pay a $50 million fine, while Binance itself faces over $4 billion in fines to settle criminal charges and must make a “complete exit” from the United States.

Following a years-long investigation into the operations of the crypto exchange, Binance and Mr. Zhao agreed to enter into a plea deal with a range of U.S. federal agencies, including the Department of Justice (DOJ) and the Department of the Treasury.

As part of the deal, Binance agreed to plead guilty to criminal charges and pay over $4 billion in penalties as part of the sweeping settlement.

The crypto platform was charged with three counts, including money laundering, conspiracy to conduct an unlicensed money transmitting business, and violations of U.S. sanctions, according to a court filing.

Mr. Zhao, who on Tuesday appeared in court in Seattle, Washington, to plead guilty for failing to maintain an effective anti-money laundering program at Binance, agreed to step down as the company’s CEO.

“Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility,” he said in a post on X.

As part of the plea deal, Binance has agreed to forfeit $2.5 billion and pay a criminal fine of $1.8 billion, according to the DOJ.

“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed—now it’s paying one of the largest corporate penalties in U.S. history,” Attorney General Merrick Garland said in a statement.

‘Complete Exit From the United States’

Besides being hit with a total financial penalty of $4.3 billion, Binance has agreed to retain an independent compliance monitor for three years and to bolster its anti-money laundering and sanctions compliance programs.

Binance’s violations included failing to prevent and report suspicious transactions with terrorist groups, including Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and ISIS, according to the Treasury Department.

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

The crypto firm also failed to prevent and report suspicious transactions from a bevy of ransomware attackers, money launderers, and other criminals, as well as matching trades between U.S. users and those in sanctioned countries like Iran and North Korea, according to the Treasury Department.

Money from the fine imposed on Binance will be split among various government agencies, with $3.4 billion going to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

FinCEN’s settlement also imposes a five-year monitorship and requires “Binance’s complete exit from the United States,” Treasury said in a statement, in which it noted that the company’s violations of U.S. anti-money laundering and sanctions laws undermined “America’s national security and the integrity of the international financial system.”

Binance will also pay a monetary fine of $969 million to the Office of Foreign Assets Control (OFAC), with the agency requiring Binance to abide by a series of robust sanctions compliance obligations.

“To ensure that Binance fulfils the terms of its settlement—including that it does not offer services to U.S. persons—and to ensure that illicit activity is addressed, Treasury will retain access to books, records, and systems of Binance for a period of five years through a monitor,” Treasury said.

Failure on the part of Binance to live up to its settlement obligations could expose the company to “substantial” additional penalties, Treasury said. This includes a $150 million suspended penalty, which would be collected by FinCEN if Binance fails to comply with the terms of the monitorship and other compliance undertakings.

More Details

Court documents show that Binance admitted to prioritizing growth and profits over complying with U.S. law, leading to its failure to register with FinCEN and implement anti-money laundering measures, according to the DOJ.

Despite announcing a block on U.S. customers in 2019, Binance retained key U.S. customers, including valuable “VIP” customers. The exchange lacked effective know-your-customer (KYC) protocols, did not systematically monitor transactions, and never filed a suspicious activity report (SAR).

Binance’s non-compliance allowed trillions of dollars in transactions, generating over $1.6 billion in profit. Internal communications revealed a lack of protocols to flag money laundering risks, attracting illicit actors to the exchange. In addition, Binance knowingly facilitated trades between U.S. users and those in sanctioned jurisdictions, causing over $898 million in such trades between 2018 and 2022.

“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington State said in a statement.

The DOJ said that Binance received partial credit for its cooperation with the investigation, though the agency noted that Binance “did not make a timely and voluntary disclosure of wrongdoing.”

With Mr. Zhao agreeing to step down, Richard Teng has been named as the new CEO of Binance.

“It is an honour and with the deepest humility that I step into the role of Binance’s new CEO,” he said in a statement.

Mr. Teng was the Global Head of Regional Markets at Binance before being named as its new chief.

From The Epoch Times

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