Crypto leader admits to money laundering, agreeing to a $4 billion settlement. This guilty plea signifies a dramatic decline for a prominent figure in the cryptocurrency sector.
The CEO of Binance, a major cryptocurrency exchange, has resigned following a guilty plea in a U.S. federal court for failing to implement an effective anti-money laundering program. This event marks a significant development in the cryptocurrency industry, as it is the second high-profile legal action against a crypto executive in the U.S. within a month.
Changpeng Zhao, commonly referred to as “CZ” in the industry, admitted his shortcomings in the Seattle federal court. As part of a comprehensive agreement to resolve various investigations, he consented to a $50 million fine and relinquished his position at Binance. Additionally, Binance has agreed to pay $4 billion to settle several federal investigations in the U.S.
This incident is a significant setback for Zhao, who was a leading figure in the crypto world. His departure follows the conviction of Sam Bankman-Fried, former CEO of FTX, another major cryptocurrency exchange, on various fraud charges.
Zhao’s actions, notably a tweet about selling a token issued by FTX, played a critical role in the downfall of FTX, showcasing the intense rivalry between the two executives. This tweet raised doubts about FTX’s financial stability, contributing to its eventual collapse last year.
U.S. Attorney General Merrick B. Garland highlighted the recent successful prosecutions of CEOs from two of the world’s largest crypto exchanges, emphasizing that using new technology to violate the law classifies one as a criminal, not a disruptor.
The resolution between Binance and U.S. authorities concludes a series of legal disputes, including a lawsuit from the U.S. Commodity Futures Trading Commission. This lawsuit, filed in April, accused Binance of neglecting basic compliance measures to prevent potential financing of terrorism and money laundering, citing transactions that allegedly involved Hamas.
Treasury Secretary Janet Yellen criticized Binance for prioritizing profit over legal responsibilities, stating that the company’s disregard allowed funds to flow through its platform to terrorists, cybercriminals, and child abusers.
The U.S. Treasury Department has reported that Binance facilitated transactions for several groups and individuals involved in criminal activities, including al-Qassam Brigades, the military wing of Hamas, Palestinian Islamic Jihad, al-Qaeda, among others.
Merrick Garland, the U.S. Attorney General, stated that Binance’s rise to become the world’s largest cryptocurrency exchange was partly due to its involvement in criminal activities. As a result, the company is now subject to one of the largest corporate penalties in U.S. history.
Binance reportedly earned approximately $1.35 billion in fees from its U.S. customers. Following these developments, Changpeng Zhao, known as “CZ,” announced his resignation as CEO of Binance via a Twitter post. He acknowledged his emotional difficulty in stepping down but recognized it as the right decision, accepting responsibility for his mistakes.
Binance, in a blog post, attributed its past failures to rapid global growth in a newly evolving and initially under-regulated industry, admitting to some misguided decisions along the way.
Since its establishment in 2017, Binance has experienced rapid growth but has also faced numerous controversies. The Financial Conduct Authority (FCA) in the UK has issued warnings against Binance, blocking its UK launch and highlighting it as a significant risk to consumers.
Lord Ed Vaizey, a former digital and culture minister, joined Binance’s advisory board to offer guidance on regulatory compliance. In October, Binance had to halt new UK customer registrations after the FCA revoked approvals for a partner firm Binance was collaborating with.
Richard Teng, formerly Binance’s head of regional markets, has been appointed as the new CEO.
Cryptocurrencies have long been criticized for their potential use in criminal activities, including evasion of detection and involvement in scams costing consumers millions. The cryptocurrency industry has come under increased scrutiny following the collapse of FTX, once valued at $32 billion. FTX’s founder, Sam Bankman-Fried, was convicted of fraud in the U.S. for misusing customer funds and is awaiting sentencing.
On Tuesday, the price of Bitcoin dropped by 2% and was trading at around £29,350.
