NEW YORK, Nov 21 (Reuters) – Binance CEO Qiao Changpeng has resigned as part of a $4.3 billion settlement resolving a years-long investigation into the world’s largest cryptocurrency exchange. He has pleaded guilty to violating anti-money laundering laws, prosecutors announced on Tuesday. .
The deal, which will see Mr. Zhao personally pay $50 million, is described by prosecutors as one of the largest corporate penalties in U.S. history. This is another blow to the investigation-plagued crypto industry and follows the recent fraud conviction of FTX founder Sam Bankman Fried.
But legal experts said this was a good outcome for Mr. Zhao, who would be able to keep his vast wealth intact and keep his stake in the exchange Binance, which he founded in 2017.
Authorities say Binance violated U.S. anti-money laundering and sanctions laws and reported more than 100,000 suspicious transactions with organizations the U.S. considers terrorist groups, including Hamas, al-Qaeda, and the Islamic State of Iraq and Syria. I didn’t.
The exchange also never reported any transactions with websites that specialize in selling child sexual abuse material, which was one of the largest recipients of ransomware proceeds.
“Binance has made it easy for criminals to move stolen funds and illegal proceeds to the exchange,” U.S. Attorney General Merrick Garland said Tuesday. “Binance not only failed to comply with federal law, but pretended to do so.”
Some of the charges, both criminal and civil, relate to practices first reported by Reuters in a series of articles in 2022.
The Justice Department, which negotiated a settlement with the Commodity Futures Trading Commission (CFTC) and the Treasury Department, sentenced Zhao to 18 months in prison, the maximum sentence suggested by federal guidelines, the New York Times reported. I’m looking for.
Binance’s former chief compliance officer Samuel Lim has been indicted by the CFTC, the agency announced. Neither Mr Lim nor his lawyer responded to requests for comment.
Prosecutors say Binance will pay $1.81 billion within 15 months and forfeit another $2.51 billion as part of the deal.
Billionaire Mr. Chao was born in China and immigrated to Canada at the age of 12. He pleaded guilty Tuesday afternoon in Seattle court.
After the settlement was announced, Chao said on social media: “Today, I have resigned as CEO of Binance.” “Sure, it wasn’t easy letting go of my emotions. But I know it’s the right thing to do. I made a mistake, and I have to take responsibility. This is my fault. It’s what’s best for our community, what’s best for Binance, and what’s best for me.”
Authorities have been investigating Zhao and Binance for years, but Zhao’s departure marks a dramatic development for one of the crypto industry’s most powerful figures and for Binance. The transaction calls into question the future of crypto exchanges that he has tightly controlled.
In his post, Chao said that long-time Binance executive Richard Teng will take over the company.
“These resolutions acknowledge our responsibility for historic criminal compliance violations and allow us to turn the page,” Binance said in a statement.
In a separate statement, Teng said it would focus on “reassuring users that they can continue to have confidence in the company’s financial strength, safety and security.”
ZHAO maintains BINANCE stock
Iesha Yadav, a law professor at Vanderbilt University, said that while the fine is very high, it appears manageable for Binance.
[1/2]Binance founder and CEO Zhao Changpeng speaks at an event in Athens, Greece, November 25, 2022.Reuters/Kostas Baltas/File photo Obtaining license rights
“This transaction…seems to be aimed at giving Binance a chance to live another day while eliminating its figurehead CZ, who was intrinsically tied to the growth of its business model,” she said.
However, Yadav added that since Zhao appears to hold a stake in Binance, he may still be able to exert influence over the company.
According to Forbes, Zhao is worth $10.2 billion.
Robert Frenchman of Mukasey Frenchman LLP said that given the seriousness of the violations and the parties involved, the U.S. government likely had to entice Mr. Zhao to come to the United States. “It seems like he came out of this situation looking pretty good.”
“He still has enormous wealth,” said the Frenchman. “He won’t be spending much time in a US prison. He retains ownership of Binance, and the company is resolving some of its biggest legal issues right now.”
Jeffrey Cohen, an assistant professor at Boston University School of Law and a former federal prosecutor, said prosecutors agreed to these benefits to Mr. Zhao, who might not have turned himself in otherwise, and to pay a large sum of money to Mr. Binance. He said it is highly likely that he weighed the idea that he wanted to do so.
“If we can get a good enough number on corporate fines, and in exchange for slightly less punishment for individual defendants, the government will do that calculation,” Cohen said.
“It may be illegal.”
Binance has been under surveillance by the Justice Department since at least 2018, Reuters reported last year, just one of the legal headaches the company faces in the United States.
In December 2020, federal prosecutors asked the company to provide internal records regarding its anti-money laundering efforts and communications involving Mr. Zhao.
The CFTC filed a civil complaint against Binance in March, accusing the company of failing to implement an effective anti-money laundering program to detect and prevent terrorist financing.
Internally, Binance executives and employees acknowledged that the platform facilitates “potentially illegal activities,” the CFTC claimed.
In February 2019, Binance’s Lim received information on Binance regarding transactions for the Palestinian militant group Hamas, the CFTC wrote.
Mr Lim, a Singaporean, “explained to colleagues that terrorists typically transfer ‘small amounts’ because ‘large amounts constitute money laundering,'” the CFTC said in the March lawsuit.
Daniel Silva, a partner at law firm Buchalter and a former federal prosecutor, said the charges likely support charges against Mr. Zhao that carry stiffer penalties, such as fraud and money laundering.
“This resolution is very favorable to him because he was at risk of facing more serious charges,” Silva said.
Still, guilty pleas involving corporate CEOs are rare, underscoring the Justice Department’s push to bring charges against executives under Democratic leadership.
“The government is hitting hard on the issue of personal liability,” said Kit Addleman, a partner at the Haynes Boone law firm in Dallas.
He noted that the amount of the fine makes it clear that the U.S. government wants to rein in the crypto sector, and called the financial magnitude of the transaction “staggering.”
Reporting by Chris Prentice and Jonathan Stempel in New York and David Lowder in Washington. Additional reporting by Tom Wilson and Elizabeth Howcroft in London and Luc Cohen in New York.Editing: Michelle Price, Megan Davis, Lisa Shoemaker
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