Binance Holdings Ltd. and its CEO, Changpeng Zhao, have pleaded guilty to severe criminal charges of anti-money laundering and U.S. sanctions violations. This includes facilitating transactions with Hamas and other terrorist groups. The US Justice Department has reached a comprehensive deal with the company in order to allow it to continue operating.
The settlement requires Binance to plead guilty to criminal charges and pay over $4 billion in penalties. Zhao, who has agreed to step down and pay a $50 million fine, appeared in court in Seattle on Tuesday to enter his guilty plea. This deal, also involving the Treasury Department and the Commodity Futures Trading Commission, brings an end to a lengthy investigation into the cryptocurrency exchange.
In a document unsealed on Tuesday, Binance was charged with three counts, including money laundering violations, conspiracy to conduct an unlicensed money transmitting business, and US sanctions violations. As part of the plea deal, Binance is facing a criminal fine of $1.8 billion and is forfeiting an additional $2.5 billion, according to court filings.
Binance’s violations involved the failure to prevent and report suspicious transactions with terrorist organizations such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and the Islamic State of Iraq and Syria. The Treasury department revealed these violations amid ongoing conflict between Israel and Hamas.
Additionally, Binance allowed over 1.1 million transactions, totaling more than $898 million, involving customers in Iran, according to the information revealed in court filings.
Attorney General Merrick Garland stated, “Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now its paying one of the largest corporate penalties in U.S. history.”
The funds from the penalty will be distributed among the DOJ, CFTC, and other agencies. This includes a significant portion going to the Treasury Department for Bank Secrecy Act and sanctions violations.
Treasury Secretary Janet Yellen emphasized that “Binance turned a blind eye to its legal obligations in the pursuit of profit, allowing money to flow to terrorists, cybercriminals, and child abusers through its platform.”
This comprehensive settlement between the parties serves to resolve all allegations of criminal wrongdoing. Proposed by Bloomberg News, the settlement was reported on Monday.
“Binance chose to prioritize growth over compliance with US legal requirements,” the US stated, thus enabling billions of dollars in transactions without necessary customer information or transaction monitoring.
The BNB cryptocurrency, which is associated with the Binance ecosystem, fell approximately 5.2% following the news. This drop followed a five-month high earlier in the day due to the impending confirmation of Binance’s settlement with the Department of Justice.
Garland and Yellen conducted a press conference to announce the details and implications of the settlement.
The Justice Department’s allegations point to a deliberate effort by Binance and top executives, including Zhao, to profit from the US market without adhering to regulatory controls.
Binance and its senior managers had been tracking and monitoring customer growth in the US from the company’s inception. Zhao, well aware of the presence of US customers, acknowledged that blocking US customers from the beginning would have limited its growth.
“Binance chose not to comply with U.S. legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain U.S. users,” the charging document stated.
During the plea hearing, Zhao mentioned that he was “a little bit scared” to come to the US to face his plea but was reassured by the thoroughness of the court. He expressed his intention to return.
Zhao faces a maximum sentence of 10 years and fines up to $500,000, plus any profits from the alleged scheme. His attorneys stated in court on Tuesday that his sentencing will be delayed by 6 months.
The settlement against Binance and its CEO marks one of the most substantial penalties within the cryptocurrency industry, which has undergone heightened scrutiny from the Justice Department and other regulatory bodies.
It is also worth noting that Zhao had previously worked at Bloomberg LP, the parent company of Bloomberg News, from 2002 to 2005.
–With assistance from Michael P. Regan, Yueqi Yang, stacy-marie ishmael, David Voreacos, and Daniel Flatley.
