- $4.3 billion in penalties and forfeitures represents “one of the largest penalties” ever obtained by DOJ against corporate defendant in criminal case, Attorney General Merrick Garland says.
- Guilty pleas come on heels of crypto exchange FTX founder Sam Bankman-Fried’s fraud conviction tied to scheme cheating customers and investors of at least $10 billion.
Binance, the operator of the world’s largest cryptocurrency exchange, pleaded guilty Tuesday to multiple financial crimes and agreed to pay about $4.3 billion, the Justice Department announced.
The company as well as its CEO and founder, Canadian national Changpeng Zhao, agreed they broke the law by failing to maintain an effective anti-money laundering program, according to the department. Binance also pleaded guilty to failing to register as a money transmitting business and to violating the International Emergency Economic Powers Act, and Zhao, who also goes by “CZ,” has resigned as CEO.
The developments come just weeks after the department secured a conviction against Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, for committing fraud through a scheme that cheated customers and investors of at least $10 billion.
The latest fall from grace marks an added shockwave to the cryptocurrency industry, which saw FTX collapse in late 2022 after Binance backed out of a plan to buy the rival. Binance said at the time that a review revealed issues it didn’t have the ability to address. Soon after that announcement, cryptocurrency prices plunged.
In a statement posted Tuesday on X (formerly Twitter), Zhao acknowledged mistakes and said he needed to take responsibility.
“As a shareholder and former CEO with historical knowledge of our company, I will remain available to the team to consult as needed,” Zhao said. He also said he might privately mentor upcoming entrepreneurs in the future, but didn’t see himself working as a startup CEO again.
In a Tuesday statement, Binance said the resolutions “acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth.” It announced its former Global Head of Regional Markets, Richard Teng, was replacing Zhao as CEO.
The case against Binance focused on the company’s failure to implement an effective program that was reasonably designed to prevent it from being used to facilitate money laundering. The Justice Department alleged that the company tried to keep “VIP” U.S. customers even after announcing in 2019 that it would block them, including by helping them register offshore entity accounts and encouraging them to provide information that suggested they were outside the U.S.
“Binance prioritized its profits over the safety of the American people,” said Attorney General Merrick Garland in a Tuesday press conference announcing the guilty pleas.
“The message here should be clear,” Garland said. “Using new technology to break the law does not make you a disrupter; it makes you a criminal.”
Officials raise alarms about terrorism funding links
Binance will be subject to a monitor and to reporting requirements going forward, and the company is also required by law to file suspicious activity reports that Garland said will assist with investigations into malicious cyberactivity and terrorism funding, including to support groups like Hamas.
Treasury Department Secretary Janet Yellen also spoke at the press conference about concerns that cryptocurrency platforms are being used to facilitate terrorism activities, illegal narcotics, and child sexual abuse. She said Binance processed transactions tied to Al-Qaeda and ISIS, but never filed a suspicious activity report.
“If virtual currency exchanges and financial technology firms wish to realize the tremendous benefits of being part of the US financial system and serving U.S. customers, they must play by the rules,” Yellen said.
The company will have to pay about $4.3 billion as a combination of a fine and having to forfeit money.
“This is one of the largest penalties we have ever obtained from a corporate defendant in a criminal matter,” Garland said.
