Binance CEO Changpeng Zhao, commonly known as CZ, has reportedly stepped down and pleaded guilty to breaking U.S. anti-money laundering laws as part of a colossal $4.3 billion settlement. The resolution follows a protracted investigation into Binance, the world’s largest cryptocurrency exchange, raising concerns about the industry’s regulatory compliance.
The settlement, described by prosecutors as one of the largest corporate penalties in U.S. history, includes a personal payment of $50 million by Zhao. Legal experts, however, view the outcome as relatively favorable for Zhao, allowing him to retain his substantial wealth and stake in Binance, which he founded in 2017.
According to prosecutors, Binance violated U.S. anti-money laundering and sanctions laws, neglecting to report over 100,000 suspicious transactions involving organizations described as terrorist groups, such as Hamas, al Qaeda, and the Islamic State of Iraq and Syria. Additionally, the exchange allegedly failed to report transactions with websites dedicated to child sexual abuse materials and emerged as one of the largest recipients of ransomware proceeds.
U.S. Attorney General Merrick Garland criticized Binance, stating, “Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges. Binance also did more than just fail to comply with federal law. It pretended to comply.”
Some of the charges, both criminal and civil, echo practices initially reported by Reuters in a series of articles in 2022. The Justice Department, in collaboration with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, negotiated the settlement, seeking an 18-month prison sentence for Zhao, the maximum suggested under federal guidelines.
Former Binance Chief Compliance Officer Samuel Lim, charged by the CFTC, has not responded to requests for comment.
As part of the settlement, Binance will pay $1.81 billion within 15 months and an additional $2.51 billion forfeiture. Zhao, worth $10.2 billion according to Forbes, pleaded guilty in a Seattle court.
In a post-settlement announcement on social media, Zhao stated, “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.”
The departure of Zhao, a prominent figure in the cryptocurrency industry, raises questions about the future of Binance. Richard Teng, a longtime Binance executive, is set to take over as CEO.
Legal experts suggest that while the fine is substantial, it appears manageable for Binance. Vanderbilt University law professor Yesha Yadav noted, “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.”
The guilty plea involving the CEO of a major company is a rare occurrence and underscores the U.S. government’s focus on individual accountability. The size of the fines reflects a broader effort to bring regulatory scrutiny to the cryptocurrency sector, signaling a pivotal moment in the industry’s relationship with authorities.
