In a groundbreaking settlement, Binance Holdings Limited, the world’s largest cryptocurrency exchange, has admitted to a range of financial violations and will pay over $4 billion to resolve the U.S. Department of Justice’s (DOJ) investigation. This corporate resolution includes criminal charges against Binance‘s CEO, Changpeng Zhao. Here’s a breakdown of the landmark settlement.
Binance’s Guilty Plea and CEO’s Resignation
Binance pleaded guilty to multiple violations, including Anti-Money Laundering (AML) breaches, unlicensed money transmitting, and sanctions violations. Changpeng Zhao, Binance‘s CEO and founder, who is a Canadian national, also pleaded guilty to failing to maintain an effective AML program and subsequently resigned from his position as CEO.
A Coordinated Effort
The settlement is a result of coordinated efforts involving the DOJ, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and the U.S. Commodity Futures Trading Commission (CFTC). This marks one of the most substantial corporate penalties in U.S. history.
Failure to Implement AML Protocols
One of the key violations was Binance‘s failure to implement comprehensive Know Your Customer (KYC) protocols and systematically monitor transactions. This allowed users to trade without providing sufficient identifying information, enabling illegal transactions on the platform, including money laundering, ransomware, and darknet-related activities.
Violating U.S. Sanctions Laws
Binance also knowingly violated U.S. sanctions laws by allowing U.S. users to transact with individuals in sanctioned jurisdictions. This resulted in millions of dollars in illegal transactions.
The Financial Penalties
As part of the plea agreement, Binance will forfeit over $2.5 billion and pay a criminal fine of $1.8 billion. The company will also have an independent compliance monitor for three years and must enhance its AML and sanctions compliance programs. Additionally, separate agreements with the CFTC, FinCEN, and OFAC will credit approximately $1.8 billion towards these resolutions.
Factors Leading to the Settlement
The DOJ considered several factors when reaching this resolution, including the severity of the offenses, the significant volume of cryptocurrency transactions for U.S. persons, and Binance‘s lack of a timely and voluntary disclosure of wrongdoing. Binance cooperated with the investigation but faced a 20% reduction in the applicable fine due to delayed evidence production.
CEO’s Role in Violations
Changpeng Zhao admitted to his understanding of Binance’s U.S. user base and its legal obligations. He acknowledged that Binance‘s growth strategy prioritized profit over compliance with U.S. laws, leading to illegal transactions involving U.S. users.
Conclusion
The Binance settlement is a significant milestone in the cryptocurrency industry, highlighting the importance of compliance with financial regulations. It serves as a stern warning to other crypto and decentralized finance (DeFi) companies that serving U.S. customers requires strict adherence to U.S. laws. The consequences for non-compliance are severe, as Binance‘s case demonstrates.