Binance’s Zhao pleads guilty and steps down to settle the US illicit finance probe. As part of a $4.3 billion deal that resolved a years-long investigation into the world’s largest cryptocurrency exchange, prosecutors said on Tuesday that Binance chairman Changpeng Zhao had resigned and pleaded guilty to violating anti-money laundering statutes in the United States.

Prosecutors have referred to the agreement as “one of the largest corporate penalties in the history of the United States,” Zhao will personally pay $50 million as part of the settlement. It is yet another setback for the cryptocurrency business, which investigations have plagued, and it follows closely on the heels of the recent conviction for fraud handed down to Sam Bankman-Fried, the creator of FTX.

However, several legal authorities have stated that this decision was favorable for Zhao since it preserved his considerable wealth and enabled him to keep his ownership in Binance, the cryptocurrency exchange he established in 2017.

In addition to violating laws against money laundering and sanctions in the United States, officials claim that Binance also neglected to notify more than 100,000 suspicious transactions with organizations that the United States has labeled as terrorist groups. These organizations include Hamas, al Qaeda, and the Islamic State of Iraq and Syria.
In addition, the exchange did not disclose any transactions with websites that specialized in the sale of child sexual abuse materials, and according to these people, the exchange was one of the primary beneficiaries of ransomware revenues.

“Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges,” U.S. Attorney General Merrick Garland said on Tuesday. “Binance is a major player in the global cryptocurrency market.” “Binance did more than only violate federal law; they also failed to comply with the law. It acted as if it were going to cooperate.”

Some of the accusations, including criminal and civil allegations, relate to activities Reuters first reported in a series of articles in 2022. These charges include both criminal and civil allegations.

According to a story in the New York Times, the Justice Department, which negotiated the settlement with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, is asking for a jail term of eighteen months for Zhao, which is the most that is suggested for him under federal guidelines.

The Commodity Futures Trading Commission (CFTC) has brought charges against Samuel Lim, who formerly served as chief compliance officer at Binance. In response to demands for comment, neither Lim nor his attorneys responded.

According to the authorities, as part of the bargain, Binance will have to forfeit an additional $2.51 billion and pay a further $1.81 billion within 15 months. Zhao, now worth a billion dollars, was born in China but migrated to Canada when he was just 12 years old. On Tuesday afternoon, he appeared in court in Seattle and entered a guilty plea.

Zhao announced his resignation as CEO of Binance on social media shortly after the settlement was made public. “Today, I stepped down as CEO of Binance,” Zhao stated. “I would admit that it was not simple to let go emotionally. But I am confident that doing so is the ethical thing to do. Because of this, I am the one who needs to accept responsibility for my actions. This is in everyone’s best interest, including myself, our community, and Binance’s.

Even though authorities have been investigating Zhao and Binance for years, the departure of Zhao signals a significant turning point for one of the most influential players in the cryptocurrency sector and Binance. The transaction raises concerns over the future of the cryptocurrency exchange, which he has closely controlled up until now.

According to what Zhao stated in his tweet, a longstanding executive at Binance named Richard Teng would take over as CEO of Binance.

According to a statement by Binance, “These resolutions acknowledge our company’s responsibility for historical and criminal compliance violations and allow our company to turn the page.”Teng stated in a separate statement that the primary priority of his time at the firm will be “reassuring users that they can remain confident in the financial strength, security, and safety of the company.”

ZHAO KEEPING HIS STAKE IN BINANCE

Yesha Yadav, a law professor at Vanderbilt University, stated that even though the punishment was quite substantial, it looked doable for Binance.

“This deal…looks designed to give Binance the chance to live another day while removing CZ, a figurehead who has been so intrinsically linked to the growth of a business model,” added the spokesperson.

According to Yadav, however, given that Zhao seems to be keeping his interest in Binance, it is feasible that he will still be able to control the firm.

Forbes estimates that Zhao’s net worth is 10.2 billion dollars. According to Robert Frenchman of Mukasey Frenchman LLP, given the severity of the infractions and the actors involved, Zhao seems to have “come out of this looking pretty good” since the United States government most likely had to encourage him to come to the United States. This is the opinion of Robert Frenchman.

“He still has enormous wealth,” the Frenchman stated. It seems unlikely that he will spend much time behind bars in the United States. Binance, a firm that has recently resolved some of its most significant legal challenges, allows him to keep his ownership position.

Jeffrey Cohen, an assistant professor at Boston College Law School and a former federal prosecutor, stated that the prosecutors most likely evaluated the rewards for Zhao against the risk that he may not have otherwise surrendered and the goal of convincing Binance to agree to pay a substantial sum. Jeffrey Cohen is also a former federal prosecutor.

“If you can get a good number for a corporate fine and the cost is that the individual defendants take a slightly lesser penalty, the government makes that calculation,” according to Cohen.

According to a report by Reuters from the previous year, Binance has been the subject of investigation by the Justice Department since at least 2018. This is only one of several legal hurdles the company must overcome in the United States.

In December 2020, federal prosecutors requested the firm to submit internal information about the company’s attempts to combat money laundering and correspondence with Zhao.

In March, the Commodity Futures Trading Commission (CFTC) brought civil proceedings against Binance, saying that the company had failed to develop an adequate anti-money laundering policy to detect and prevent terrorist financing.

According to the allegations made by the CFTC, officials and staff of Binance allegedly recognized privately that the platform enabled “potentially illegal activities.”

The extremist Palestinian group Hamas reportedly gave Binance’s Lim information on transactions made on Binance in February 2019, according to the CFTC’s writing.

According to the complaint that the CFTC filed in March against Lim, a Singaporean, Lim “explained to a colleague that terrorists usually send’small sums’ as ‘large sums constitute money laundering.'”

According to Daniel Silva, a partner at the legal firm Buchalter and a former federal prosecutor, the claims might have justified charges against Zhao bearing more significant penalties, such as fraud or money laundering.

“He was at risk of much more serious charges, and so this resolution is a very favorable one for him,” according to Silva.

Despite this, it is rare for a company’s CEO to enter a guilty plea, which emphasizes the efforts made by the Democratic leadership of the Justice Department to bring charges against CEOs.

“The government is beating a drum on the issue of individual accountability,” said Kit Addleman, a partner at Haynes Boone law firm in Dallas. “She mentioned that the scale of the penalty makes it evident that the United States government intends to rein in the cryptocurrency industry, and she described the financial heft of the agreement as “staggering.”