Changpeng Zhao, the founder of Binance, the world’s largest cryptocurrency exchange, has resigned as CEO and pleaded guilty to violating anti-money laundering laws as part of a settlement with the United States Department of Justice (DoJ). This agreement, encompassing multiple federal agencies, entails fees exceeding $4 billion, according to the DoJ’s announcement on Tuesday.
The development represents another setback for the cryptocurrency industry, which has faced a string of scandals and investigations exposing fraudulent activities by key figures and companies. Cryptocurrencies have also drawn scrutiny for their potential use by illicit groups to circumvent global financial safeguards.
In his plea, the Canadian national Zhao admitted to one count of failure to maintain an effective anti-money laundering program. Attorney General Merrick Garland remarked, “Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed. Now it is paying one of the largest corporate penalties in US history.”
This follows the recent conviction of Sam Bankman-Fried, the 31-year-old founder of FTX, the world’s second-largest crypto exchange, who was found guilty of fraud involving the misappropriation of over $10 billion from customers and investors.
Attorney General Garland emphasized, “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: Using new technology to break the law does not make you a disruptor. It makes you a criminal.”
Acting US Attorney Tessa Gorman for the western district of Washington detailed that Zhao’s operation of a financial platform without basic anti-money laundering safeguards resulted in illegal transactions between US users and individuals in sanctioned jurisdictions, including Iran, Cuba, Syria, and Russian-occupied regions of Ukraine. Binance reportedly profited from these transactions through substantial fees.
As part of the settlement, Binance is slated to pay fees amounting to $1.81 billion, forfeit $2.5 billion, and witness personal payments from Zhao totaling around $50 million. The plea agreement also mandates that Zhao abstain from any involvement with Binance, a Cayman Islands limited liability company.
Zhao has previously faced charges related to the diversion of customer funds. Treasury Secretary Janet Yellen emphasized the importance of adherence to legal obligations, stating, “Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
Yellen added, “Any institution, wherever located, that wants to reap the benefits of the US financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
