The US Department of Justice announced in a press release on Wednesday (22nd) that the cryptocurrency exchange Binance has pleaded guilty and agreed to pay over $4 billion to resolve the Department’s investigation into its violations of the Bank Secrecy Act (BSA), failure to register as a money services business, and the International Emergency Economic Powers Act (IEEPA). Binance’s founder and CEO, Changpeng Zhao (CZ), also admitted to failing to maintain an effective Anti-Money Laundering (AML) program, in violation of the Bank Secrecy Act.
According to a press release from the US Department of the Treasury, Binance’s violations include failure to implement programs to prevent and report suspicious transactions involving terrorists (including Al-Qassam Brigades of Hamas, Palestinian Islamic Jihad (PIJ), Al Qaeda, and ISIS), ransomware attackers, money launderers, and other criminals, as well as facilitating transactions between US users and users in sanctioned jurisdictions such as Iran, North Korea, Syria, and Crimea.
CZ steps down as CEO
As part of a settlement agreement with the US Department of Justice for the criminal investigation, CZ made the decision to step down and plead guilty last night. Additionally, Binance has agreed to pay $4.3 billion in settlements, including $3.4 billion to the Financial Crimes Enforcement Network (FinCEN) and $968 million to the Office of Foreign Assets Control (OFAC). (The lawsuit with the SEC is civil and still ongoing, not yet resolved.)
On the other hand, CZ appeared in a Seattle court last night and, according to the terms of his guilty plea:
CZ must pay a fine of $50 million.
Cannot participate in Binance operations for three years.
Is prohibited from making any public statements that contradict his guilty plea or the facts of the case.
While the entity Binance will be allowed to continue operating, apart from paying the $4.3 billion settlement, it must also hire independent compliance monitors (with a term of at least three years) and completely withdraw from the US market. Additionally, the Treasury Department will retain access to Binance’s books, records, and systems for five years, failure to fulfill these obligations may result in significant additional penalties.
Posting a $175 million bail
Furthermore, Bloomberg reported that, although CZ’s offenses could carry a maximum sentence of 10 years in prison, under the plea agreement, the expected sentence will not exceed 18 months. At this stage, the US Department of Justice has not made a final decision on the length of his imprisonment, with the sentencing delayed until February next year, during which time CZ will be allowed to post a $175 million bail and reside in the UAE, but must return to the US 14 days before sentencing.
CZ’s resignation letter
CZ also posted a public letter on social media early this morning, officially announcing his resignation and appointing Richard Teng, the Regional Market Global Head, as the new CEO of Binance. The full text of the letter is as follows:
“Today, I stepped down as the CEO of Binance. Indeed, emotionally letting go is not easy. But I know it’s the best choice, I have made mistakes, and I must take responsibility. This is the best choice for our community, for Binance, and for myself. Binance is no longer a baby, it’s time for me to let it walk, let it run. I know Binance will continue to thrive and shine with its strong backup. I am pleased to announce that our current Regional Market Global Head, Richard Teng, has been appointed as the new CEO of Binance today.
Teng is a high-quality leader with over thirty years of experience in financial services and regulation. He will lead the company through the next phase of growth. He will ensure that Binance achieves the next level of security, transparency, compliance, and growth. Prior to joining Binance, Richard served as the CEO of the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority; Chief Regulatory Officer of the Singapore Exchange (SGX); Chief Financial Officer of the Monetary Authority of Singapore. Together with Richard and the entire team, I believe the best days for Binance and the cryptocurrency industry are ahead.
As a shareholder and former CEO who knows our company’s history, I will provide necessary advice to the team according to the framework set by the US agencies.
What will I do next? I will take a break first. In the past six and a half years, I have never truly rested (turned off the phone). After that, my current idea is that I may engage in passive investments, becoming a token holder or shareholder of startups in the blockchain/Web3/DeFi, artificial intelligence, and biotechnology fields.
I am excited that I finally have more time to study DeFi. I cannot imagine myself being a CEO again to drive the growth of a startup company. I am satisfied with being a one-time (lucky) entrepreneur. If there are listeners, I may be willing to privately coach/mentor a few upcoming entrepreneurs. If nothing else, I can at least tell them what not to do.
At this point, I am proud to point out that in our resolution with US agencies, they:
Did not charge Binance with misappropriating any user funds,
Did not charge Binance with engaging in any market manipulation.
Funds are safe.
Therefore, I look forward to seeing the new leadership take office. Please join me in congratulating Teng on his well-deserved promotion.
Keep moving forward!
CZ
11/22
Update 12:03: Added content from the press releases of the US Department of Justice and the Department of the Treasury in the first two paragraphs.