Binance CEO pleads guilty and agrees to pay $50 million fine

(Bloomberg) — Binance Holdings Ltd. Chief Executive Officer Changpeng Zhao expressed regret for anti-money laundering violations and agreed to pay a $50 million fine on Tuesday under a comprehensive agreement with the Justice Department aimed at maintaining the company’s operations.

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Zhao agreed to resign as part of a settlement with the Treasury Department and the Commodity Futures Trading Commission, according to people familiar with the matter; Binance agreed to plead guilty and pay a $4.3 billion fine, according to people familiar with the deal. The deal ends a long-standing ban on cryptocurrency exchanges. Several years of investigation.

In a charging document released on Tuesday, Binance was charged with three counts, including money laundering violations, conspiracy to conduct unlicensed money transfer operations, and violating U.S. sanctions. Binance allowed at least 1.1 million transactions worth more than $898 million to customers in Iran, according to court documents.

The settlement negotiated by the parties will resolve allegations of criminal misconduct. Bloomberg News reported the settlement on Monday.

Read more: US is seeking over $4 billion from Binance to end case

The U.S. said Binance chose to “prioritize growth over complying with U.S. legal requirements,” allowing it to conduct billions of dollars in transactions without collecting required customer information or monitoring transactions.

BNB, a cryptocurrency associated with the Binance ecosystem, fell about 5% following the news. The coin hit a five-month high earlier in the day after news broke that the U.S. Department of Justice quickly confirmed a settlement with the exchange.

U.S. Attorney General Merrick Garland and Treasury Secretary Janet Yellen will hold a press conference at 3:00 pm ET on Tuesday to announce more details of the settlement.

criminal charges

The Justice Department accuses the company and executives, including Zhao, of taking steps to conceal its efforts to evade U.S. law. The documents allege that from approximately August 2017 to October 2022, Binance and Zhao engaged in a “deliberate and calculated effort” to profit from U.S. markets without exercising legally required controls.

The charging document states that Binance “chose not to comply with U.S. legal and regulatory requirements because it believes that doing so would limit its ability to attract and retain U.S. users.”

The complaint alleges that Binance and its senior executives have tracked and monitored user growth in the United States since the company’s inception, including company charts from 2017 showing that more than 23% of Binance users are from the United States — a larger proportion than any other Other countries.

The government said Zhao was well aware of the presence of U.S. customers on international exchanges, writing in 2019 that if Binance had blocked U.S. customers from day one, “it wouldn’t be as big as it is today.”

“It’s better to ask for forgiveness than to receive permission,” Zhao wrote, describing the situation as a “grey area.”

Zhao faces up to 10 years in prison and a fine of up to $500,000, plus any profits he made from the alleged scheme. His lawyer told the court on Tuesday that his sentencing would be delayed by six months. Zhao’s agreement included waiving his rights. Judge Brian Tsuchida said during the plea hearing that he could appeal, but the sentence would not exceed 18 months.

Cryptocurrency crackdown

The resolution against the world’s largest cryptocurrency exchange and its top leader is one of the largest penalties imposed within the cryptocurrency industry, which has faced intense scrutiny from the Justice Department, other government agencies and lawmakers.

Binance exploded onto the cryptocurrency scene in 2017, surpassing its larger rivals almost immediately, and after the collapse of FTX in November 2022, its global market share soared to over 60%. Since then, its combined spot cryptocurrency market share has fallen below 44% this month, according to researcher CCData.

The Justice Department recently charged FTX co-founder Sam Bankman-Fried with bribery in New York for allegedly orchestrating the misappropriation of billions of dollars in customer funds, leading to the collapse of the cryptocurrency exchange. Bankman-Fried was found guilty of fraud following a trial.

The U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) have both sued Binance and Mr. Zhao, alleging a series of violations, including mishandling customer funds and allowing Americans to illegally access the platform.

–With assistance from Michael P. Regan, Yueqi Yang, stacy-marie ishmael, and David Voreacos.

(Hearing details starting in paragraph 1 updated with new details of unsealed criminal information against Binance in paragraph 3.)

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