Binance founder and CEO Changpeng Zhao will resign from the firm and has pleaded guilty to violating criminal law as part of a deal with the government of the United States.
Zhao’s resignation deal includes him pleading guilty to violating the Bank Secrecy Act, which deals with U.S. anti-money-laundering law. The 46-year-old Zhao, who doesn’t live in the U.S., appeared in person on Tuesday in Seattle federal court, where he entered the guilty plea, Attorney General Merrick Garland said during a press conference announcing the action.
The Treasury Department announced Tuesday that Binance, the world’s largest cryptocurrency exchange, has agreed to pay more than $4 billion in fines to settle civil accusations from federal regulators. The settlement with the Financial Crimes Enforcement Network alone is for $3.4 billion, which is the largest settlement in Treasury Department history.
Binance settled with the Treasury Department over violations of the Bank Secrecy Act and apparent violations of multiple sanctions programs, according to the department. The government said Binance failed to implement programs to prevent transactions with terrorists, including Hamas and the Palestinian Islamic Jihad — the groups that massacred hundreds of Israeli citizens during the Oct. 7 terrorist attacks.
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Binance also failed to prevent and report matching trades between U.S. users and those in sanctioned parts of the world, such as North Korea, Iran, and the Crimea region of Ukraine, the Treasury Department announced.
Treasury Secretary Janet Yellen said that 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. Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry,” she said on Tuesday.
The move is a major one for Binance because it will reportedly end federal investigations into the exchange, which have been going on for years. The deal brokered with Binance will allow Zhao to keep his majority ownership of the company, but as part of it, he won’t be allowed to hold an executive position at the firm.
As recently as June, the Securities and Exchange Commission filed a lawsuit against Binance and Zhao, accusing them of lying to federal regulators and mishandling customer funds.
In that lawsuit, the SEC alleged that Binance had been secretly diverting customer funds to another trading entity controlled by Zhao, which then engaged in fraudulent trading. The SEC said that made Binance’s volume appear bigger than it was. The complaint accused Binance and Zhao of “blatant disregard” for federal securities law.
“In doing so, Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk,” the SEC alleged in the lawsuit.
In March, the Commodity Futures Trading Commission announced it was suing Binance and Zhao for allegedly breaking U.S. regulatory law, labeling the firm’s compliance efforts a “sham.”
Another Justice Department investigation of Binance had been looking at whether the firm’s anti-money-laundering department was allowing people in U.S.-sanctioned countries (for instance, Russia and Iran) to execute trades with Americans using the platform.
The Commodity Futures Trading Commission has also accused Binance of lacking a program to spot money laundering and the financing of terrorism.
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Following Zhao’s deal with the U.S. government, the price of bitcoin dropped a bit. After previously being up from the day before, the value of a bitcoin fell more than 2% to just below $36,800.
Meanwhile, Binance Coin (BNB), which is the cryptocurrency token developed and launched for trading on the exchange, immediately shed nearly 9% of its value and was trading at $238 per coin.
