Changpeng Zhao, the CEO and founder of Binance, the world’s largest cryptocurrency exchange, has stepped down from his role and pleaded guilty to violating anti-money laundering laws, according to US authorities. This plea deal with the Department of Justice is part of a broader settlement that involves various federal agencies and includes a total of more than $4bn in fees, officials announced on Tuesday.
The news is the latest setback for the cryptocurrency industry, which has faced numerous scandals and investigations uncovering fraudulent behavior by major players and firms. Cryptocurrency has also come under fire as a tool used by illicit groups to bypass global financial safeguards.
The US Attorney General, Merrick Garland, emphasized that Binance, under Zhao’s leadership, became the largest cryptocurrency exchange in the world partly due to the crimes it committed, and is now facing one of the largest corporate penalties in US history.
In a separate case, the founder of FTX, the world’s second-largest crypto exchange, Sam Bankman-Fried, was recently convicted of fraud for stealing more than $10bn from customers and investors. Garland noted that the Justice Department has successfully prosecuted the CEOs of two major cryptocurrency exchanges in the past month, sending a clear message that using new technology to break the law does not make one a disruptor, but a criminal.
According to prosecutors, because Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, Binance facilitated illegal transactions between US users and those in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine, from which the company profited significantly. As part of the settlement, Binance will have to pay fees of $1.81bn, forfeit $2.5bn, and Zhao will have personal payments of about $50m.
In addition, Zhao is barred from any involvement with Binance, and the company will face significant consequences for turning a blind eye to its legal obligations in the pursuit of profit. Treasury Secretary Janet Yellen emphasized that any institution, regardless of location, that seeks to benefit from the US financial system must play by the rules that ensure safety from terrorists, foreign adversaries, and crime.