Binance CEO pleads guilty to money laundering in Seattle federal court

Nov 21, 2023, 2:38 PM

binance cryptocurrency...

Blockchain and cryptocurrency Binance founder and CEO Chinese-born Canadian Changpeng Zhao, also known as CZ, poses during an interview at the technology startups and innovation fair in Paris on May 16, 2022. (Photo: Eric Piermont/Getty Images)

(Photo: Eric Piermont/Getty Images)

Binance CEO Changpeng Zhao pleaded guilty to criminal charges of violating U.S. anti-money laundering requirements in a Seattle federal court Tuesday morning. Before pleading guilty, Zhao  stepped down as the company’s chief executive.

The cryptocurrency exchange also agreed to a roughly $4 billion settlement. The plea arrangement with the government resolves a multi-year investigation into the company.

An estimated 1.1 million transactions that violated trade law occurred using Binance, including no measures to prevent traders from engaging with countries under U.S. sanctions, including Iran.

“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now it is paying one of the largest corporate penalties in U.S. history,” Attorney General Merrick B. Garland said. “The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”

More on cryptocurrency: Founders of crypto mixer sanctioned in Wash. after US cracks down

Binance said in a statement that it made “misguided decisions” as it quickly grew to become the world’s largest crypto exchange and that the settlement acknowledges its “responsibility for historical, criminal compliance violations.”

“Ever since Binance launched its convertible virtual currency platform, it has knowingly evaded the U.S. laws designed to protect these systems,” Treasury Secretary Janet Yellen said. “Binance was allowing illicit actors to transact freely, supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions.”

During the proceedings in U.S. District Court, Magistrate Judge Brian A. Tsuchida set Zhao’s sentencing for Feb. 23, however that’s likely to be delayed. He faces a possible guideline sentence range of up to 18 months.

The former CEO and other high-ranking Binance employees were charged with violating the Bank Secrecy Act by failing to implement an effective anti-money laundering program and for willfully violating U.S. economic sanctions, according to CNBC. The DOJ stated Zhao violated U.S. law “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law.”

The charges follow civil suits brought earlier this year by both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. The DOJ has also recommended the court to impose a $50 million fine on Zhao.

“Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said in a prepared statement.

More on Changpeng Zhao

Zhao, who also goes by his initials CZ, started operating Binance in 2017 after being a part of the creation of Blockchain, a cryptocurrency financial services company. He also previously served as chief technology officer of another cryptocurrency exchange, OKCoin, before launching Binance.

As of July 2022, Binance became the world’s largest cryptocurrency exchange by trading volume. Zhao ranked as the 68th richest person in the world, according to the Bloomberg Billionaires Index that was updated Nov. 20. He has an approximate net worth of $23.5 billion.

Binance has been the target of money laundering investigations by multiple law enforcement jurisdictions, with said investigations heating up over the last 12 months. The SEC targeted the company with an expansive lawsuit in June, according to CNBC, alleging that Binance was running an illegal securities exchange and mishandling customer funds.

From the Dori Monson archives: FTX crypto scandal hits Washington bank, politicians

Through 13 charges brought against Binance by the SEC, the cryptocurrency firm was accused of commingling billions of dollars in customer money with Binance’s own funds. The now-bankrupt crypto exchange FTX faced similar allegations.

Binance made waves late last year in the wake of the collapse of FTX — once the third-largest cryptocurrency exchange — when Zhao proposed creating a rescue fund that would save otherwise healthy crypto companies from failure. He took to X, formerly known as Twitter, to share that his company is looking at creating “an industry recovery fund, to help projects which are otherwise strong, but in a liquidity crisis.”

Earlier this month, a New York jury convicted FTX founder Sam Bankman-Fried of fraud for stealing at least $10 billion from customer and investors.

Contributing: The Associated Press

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Binance CEO pleads guilty to money laundering in Seattle federal court