The Binance Story: Binance to Pay $4.3B Fine and Exit The US Market, CZ Resigns as CEO

TL;DR

• Binance is set to pay a $4.3 billion fine to US authorities for breaking sanctions and money-transmitting laws.

• Changpeng Zhao (CZ) resigns as CEO and pleads guilty to money laundering charges.

• Richard Teng takes over as Binance CEO.

• CZ was released on bail and will be sentenced in February.

Binance To Pay a $4.3 Billion Fine

Binance, the world's largest crypto exchange, has agreed to pay a $4.3 billion fine for breaking sanctions and money-transmitting laws. The Department of Justice describes this as one of the largest penalties the United States has ever obtained from a corporate defendant.

The cryptocurrency exchange’s founder Changpeng "CZ" Zhao pleaded guilty in Seattle to charges he personally faced. CZ agreed to pay a $50 million fine and will no longer serve as Binance’s CEO.

Following his resignation, Richard Teng, a former Abu Dhabi regulator and later Binance's regional markets head, will take over as CEO.

US authorities accused Binance of failing to maintain a proper anti-money laundering program, operating an unlicensed money-transmitting business and violating sanctions law, 

Binance was accused of failing to maintain a proper anti-money laundering program, operating an unlicensed money-transmitting business and violating sanctions law, according to a court filing unsealed on Tuesday. Attorney General Merrick Garland commented that,

"Binance employees knew and discussed that the company was serving thousands of users in sanctioned countries, and they knew that facilitating transactions between U.S. users and users in sanctioned countries would be in violation of U.S. law. But they did it anyway."

CZ Pleads Guilty, Resigns as CEO

In another filing, CZ pleaded guilty to violating the Bank Secrecy Act and causing a financial institution to violate the BSA. 

CZ was arrested but has been released from custody on a $175 million personal recognizance bond. The Binance founder is posting $15 million held in a trust account by Davis Wright Tremaine (separate from the bond). Furthermore, he agreed to forfeit funds if he violated the terms of his release.

The former Binance CEO is also finding two guarantors, who are pledging $250,000 and $100,000 respectively. He will be sentenced on Feb. 23, 2024, at 9 a.m. Pacific Time.

As per his release, CZ has been barred from breaking the law, tempering with witnesses or victims or taking any non-prescribed controlled substances. 

Furthermore, CZ is allowed to leave the United States but has to return 14 days before the sentencing. Zhao will remain in the Seatle area until November 27, giving the DOJ lawyers and his attorneys the time to iron out the disagreement with the district judge overseeing the case.

Magistrate Judge Brian Tsuchida revealed that CZ also waives his right to appeal any sentence over 18 months. The DOJ and CZ agreed to a $50 million fine but no prison time was discussed. 

Zhao founded Binance in 2017 and it quickly became the world’s leading cryptocurrency exchange. He has been running the company since then but has now left the CEO role. 

Binance To Completely Exit The US Market

As part of the agreement, Binance will leave the United States and appoint a monitor for five years to settle charges with the Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Asset Control (OFAC). 

FinCEN will appoint a monitor for five years who will oversee Binance’s sanctions compliance program. Furthermore, the US Treasury Department will have access to Binance's records and systems during that time. While commenting on this latest development, Treasury Secretary Janet Yellen said Binance’s sanction was the largest settlement in the department's history. 

A senior official told reporters that Binance.US is a separate entity from Binance and is a registered money services business. Hence, it is not affected by Binance’s exit though it is affiliated with Binance. 

Binance was accused of allowing individuals associated with terrorist organizations including Hamas, the Islamic State of Iraq and Syria, people in North Korea and other sanctioned jurisdictions to use its platforms. It also allowed money launderers and malicious cybersecurity actors to move funds via Binance.