Binance Founder Pleads Guilty to Money Laundering, Company to Pay $4.3 Billion in Fines
The guilty pleas and settlements were announced in federal court in Seattle, where Zhao agreed to pay a $50 million fine and step down from his role as the company's chief executive. He faces a potential 18 months in prison, with the possibility of a stiffer penalty, according to senior Justice Department officials. As part of Binance's plea deal, the company will accept the appointment of a government monitor to oversee its business. Zhao is barred from any involvement in Binance until three years after the monitor is appointed.
This development is a monumental one for the relatively young and fast-growing crypto world. Binance has been a crucial player, at times processing two-thirds of all digital currency trades. Zhao, often considered the richest man in crypto, boasts more than 8.5 million followers on the platform formerly known as Twitter (X). The guilty pleas follow a recent conviction of crypto mogul Sam Bankman-Fried for fraud related to the collapse of his FTX crypto exchange. The actions against Binance and Zhao were unveiled at a news conference attended by Treasury Secretary Janet Yellen and Attorney General Merrick Garland.
Binance Founder Pleads Guilty to U.S. Market Exploitation and Financial Violations, Faces Record-Breaking Penalties
Federal authorities revealed that Binance, under Zhao's direction, engaged in a deliberate effort to profit from the U.S. market without implementing required controls. Court documents highlighted a systematic evasion of laws, including the Bank Secrecy Act, with Binance allowing customers from sanctioned countries, such as Iran, Cuba, and Syria, to access the platform. Additionally, Binance failed to institute programs to report suspicious transactions involving terrorist groups, according to Treasury officials. The government accused Binance of allowing illicit actors to transact freely, supporting activities ranging from child sexual abuse to illegal narcotics to terrorism.
Zhao, also known as C.Z., was implicated in personally seeking to hide Binance's dealings with large U.S.-based customers, referred to as VIPs. Court filings revealed efforts to circumvent U.S. supervision agencies by using methods like phone calls that would leave "no trace" of interactions. The penalty imposed on Binance is one of the largest ever imposed by the U.S. government against a financial firm, nearing the scale of Goldman Sachs' payment in 2020 to resolve foreign bribery charges. The settlement falls short of BNP Paribas' 2014 payment for violating U.S. sanctions rules.
Binance Faces Regulatory Backlash: SEC Withholds Settlement, Market Share Declines, and Founder's Fate Uncertain
Regulators had initiated actions earlier in the year, with the CFTC filing a lawsuit in March and the SEC charging Binance and Zhao with mishandling customer funds and lying to regulators in June. Notably, the SEC did not participate in the settlement, and the agency's stance on the matter remains undisclosed.
Binance's share of the crypto trading market has declined this year amid regulatory pressures, impacting its business. Zhao's fate is yet to be determined, with his sentencing scheduled months away. In the meantime, he has been granted bail at $175 million secured by $15 million in cash and is permitted to return to the United Arab Emirates, where he has been residing. Despite efforts by Binance to address compliance issues, the series of enforcement actions and legal challenges have cast a shadow over the once-dominant cryptocurrency exchange.