Binance Zhao pleads guilty, steps down to settle US illicit finance probe Technology

Binance CEO Changpeng Zhao pleads guilty to violating US anti-money laundering laws in $4.3 billion settlement, stepping down as CEO.

Binance CEO Changpeng Zhao has resigned and pleaded guilty to violating U.S. anti-money laundering laws, resulting in a $4.3 billion settlement to resolve a lengthy investigation into the world's largest cryptocurrency exchange. This settlement, one of the largest corporate penalties in U.S. history, comes as a significant setback for the crypto industry, which has been plagued by legal probes. The recent conviction of FTX founder Sam Bankman-Fried for fraud further compounds the industry's challenges.

Prosecutors revealed that Binance breached U.S. anti-money laundering and sanctions laws by failing to report over 100,000 suspicious transactions with organizations designated as terrorist groups, including Hamas, al Qaeda, and the Islamic State of Iraq and Syria. Additionally, the exchange neglected to report transactions involving websites selling child sexual abuse materials and was a major recipient of ransomware proceeds.

U.S. Attorney General Merrick Garland condemned Binance for enabling criminals to easily transfer stolen funds and illicit proceeds on its exchanges. The exchange not only failed to comply with federal law but also pretended to do so. Some of the charges, both criminal and civil, are related to practices initially reported by Reuters in 2022.

The Justice Department, in collaboration with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, negotiated the settlement, which includes an 18-month prison sentence for Zhao, the maximum under federal guidelines. Furthermore, Binance's former chief compliance officer, Samuel Lim, faces charges from the CFTC.

As part of the settlement, Binance will pay $1.81 billion within 15 months and an additional $2.51 billion in forfeiture. Billionaire Zhao, who was born in China and moved to Canada at a young age, pleaded guilty in a Seattle court. Following the announcement of the settlement, Zhao tweeted that he had stepped down as CEO of Binance, acknowledging his mistakes and taking responsibility for the benefit of the community and the company.

While Zhao and Binance have been under investigation for years, his resignation marks a significant development for the crypto industry and the exchange. The future of Binance, founded by Zhao in 2017, is now in question. Richard Teng, a long-time Binance executive, will assume the role of CEO, with Zhao retaining his stake in the company.

The settlement, while substantial, appears manageable for Binance, allowing the company to move forward while removing Zhao, who has been closely linked to the company's growth. Despite Zhao retaining his stake, there are concerns that he may still exert influence on the company. Forbes estimates Zhao's net worth at $10.2 billion.

The Justice Department has been investigating Binance since at least 2018, and the company has faced numerous legal challenges in the United States. The CFTC filed civil charges against Binance, alleging a failure to implement an effective anti-money laundering program to detect and prevent terrorist financing. Internal communications revealed that Binance officers and employees acknowledged the platform's facilitation of potentially illegal activities.

In conclusion, Binance's $4.3 billion settlement and Zhao's resignation mark a significant turning point for the crypto industry. The future of Binance remains uncertain, but the company aims to reassure its users of its financial strength, security, and safety under new leadership. While the settlement is substantial, it allows Binance to address compliance violations and move forward, albeit without its founder at the helm.

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