Binance Holdings, operator of the largest cryptocurrency exchange in the world, pleaded guilty to U.S. criminal charges that it violated the Bank Secrecy Act and other laws and will pay $4.3 billion to resolve the investigation, the Justice Department said Tuesday.
In addition, Binance founder Changpeng Zhao entered a guilty plea of failing to maintain an effective anti-money laundering program in violation of the BSA, according to the DOJ. Zhao has stepped down as CEO of the company.
“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 U.S. history,” U.S. Attorney General Merrick Garland said in a statement. Garland alluded to the U.S. government’s prosecution of another cryptocurrency executive, FTX founder Sam Bankman-Fried, who a jury found guilty on seven counts of fraud and conspiracy earlier this month. “The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal,” Garland said.
Binance’s “willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform,” Secretary of the Treasury Janet Yellen said in a statement. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
In a post on X (formerly Twitter), Zhao wrote in part, “Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.” According to Zhao, RichardTeng, formerly Binance’s global head of regional markets, has been named the new CEO.
Zhao also wrote in the post, “I am proud to point out that in our resolutions with the U.S. agencies they: do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation.”
Binance, which launched in 2017, focused on attracting high-volume customers, per the DOJ. Because it served U.S. customers, the company was required to register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as a money services business and to implement an effective anti-money-laundering program that was “reasonably designed to prevent Binance from being used to facilitate money laundering,” according to the Justice Department.
According to court documents, Binance failed to implement controls and procedures to prevent money laundering, such as implementing comprehensive know-your-customer protocols or systematically monitoring transactions. In addition, Binance never filed a suspicious activity report (SAR) with FinCEN, the DOJ charged. The company “caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria and Russian-occupied regions of Ukraine — transactions for which Binance profited with significant fees,” according to said Acting U.S. Attorney Tessa Gorman for the Western District of Washington. For example, between January 2018 and May 2022, Binance “willfully caused over $898 million in trades between U.S. users and users ordinarily resident in Iran,” according to the DOJ.
Zhao, who is a Canadian national, “told employees it was ‘better to ask for forgiveness than permission’ and prioritized Binance’s growth over compliance with U.S. law,” according to court documents. Between August 2017 and October 2022, U.S. users conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance, according to the Justice Department.
As part of the plea agreement, Binance agreed to forfeit $2.51 billion and to pay a criminal fine of $1.805 billion. The company has also agreed to retain an independent compliance monitor for three years and remediate and enhance its anti-money laundering and sanctions-compliance programs.
The DOJ said Binance’s guilty plea is part of coordinated effort among the Department of the Treasury’s Financial Crimes Enforcement Network and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).
