Cryptocurrency laundering: Binance will pay more than $4 billion in fines, the boss will resign

The bill will amount to several billion dollars. The world’s largest cryptocurrency exchange Binance and its CEO Changpeng Zhao have reached an agreement with US authorities that includes the resignation of the iconic boss.

“CZ,” his nickname, has agreed to plead guilty to violating U.S. anti-money laundering laws, the U.S. Justice Department said Tuesday. As part of the overall settlement, Binance also pleaded guilty to violations of US law and agreed to pay two fines of $3.4 billion and $968 million to two US Treasury agencies, the Commerce and Treasury Department said.

According to a number of American media reports, American authorities have been investigating the platform’s activities since at least 2018, but have not yet officially taken legal action. Changpeng Zhao was scheduled to appear before a federal judge in Seattle, Washington, on Tuesday to plead guilty.

The company’s co-founder, director and majority shareholder, a Canadian citizen born in China, is the most famous person in the world of digital currencies. According to specialist website CoinMarketCap, Binance is by far the largest cryptocurrency exchange, with approximately $12 billion worth of transactions carried out in the last 24 hours.

Growth, not conformity

The US investigation, widely reported in the press, has posed a threat to Binance for several years, where several executives have resigned in recent months. In addition, this year the platform was sued by two major financial market regulatory agencies – the SEC and the CFTC. The latter criticizes Binance, in particular, for not taking sufficient measures to prevent money laundering. In particular, customers could access the platform without first verifying their identity.

According to investigations by two Treasury agencies, Binance failed to take steps to prevent transactions carried out by movements such as the Islamic State group, al-Qaeda or the Ezzedine al-Qassamn Brigades, the armed wing of Hamas. “By failing to take anti-money laundering measures, Binance allowed a wide range of criminals to conduct transactions on the platform,” the US Treasury said.

Digital currencies are regularly used by criminal organizations to transit their assets. In general, the sector offers a certain anonymity and fewer safeguards against money laundering than the traditional financial system, subject to very stringent compliance obligations.

“Since its inception, Binance and its founder Changpeng Zhao have prioritized (respectively) growth and personal wealth over financial regulations aimed at preventing the laundering of criminal assets,” commented Seattle federal prosecutor Tessa Gorman, as quoted in the press release.

The investigation also found that after the company committed to no longer accepting American clients starting in 2019, Binance retained some of them, particularly those who were the most active and generated significant site turnover. According to the Wall Street Journal, the agreement reached with the authorities will allow Changpeng Zhao to maintain his stake in Binance capital. His sentence will be announced later.

Binance has committed to the US authorities to use an external compliance monitor for three years and to comply with applicable compliance regulations.