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On Tuesday, federal officials revealed that Binace, the biggest cryptocurrency exchange globally, has agreed to pay a sum of more than $4 billion to US authorities. This comes after the company admitted to engaging in unlicensed money transfers, violating sanctions, and neglecting to implement anti-money laundering measures.
According to the Treasury Department, there were failures to establish protocols for reporting potentially suspicious transactions with terrorist organizations, and as a result, trading with countries under sanctions such as Iran, Cuba, and Syria was allowed.
On Tuesday, Treasury Secretary Janet Yellen stated that Binance had been enabling unlawful individuals to conduct transactions without restriction, aiding in activities ranging from child sexual exploitation to illegal drug trade to terrorism.
The CEO and founder of Binance, Changpeng Zhao, will be resigning and paying a $50 million penalty after pleading guilty to associated accusations. He may potentially receive a prison sentence of up to 18 months.
“I have made errors and it is my responsibility to take ownership,” the executive stated on X. “This decision is in the best interest of our community, Binance, and myself.”
Government representatives outlined a diverse array of issues with the cryptocurrency exchange, which at certain points managed the majority of worldwide cryptocurrency transactions.
US Attorney General Merrick Garland stated on Tuesday that Binance knowingly facilitated transactions worth millions of dollars between American users and individuals or entities under US sanctions. Additionally, criminals from various countries were able to utilize Binance’s platform to transfer their illicit gains and other illegal profits.
Binance prioritized making money over the well-being of Americans.
The substantial fine, which is among the biggest in the history of US financial regulation, will also be used to settle investigations by the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network (FinCen) of the Department of the Treasury, and the Office of Foreign Assets Control.
The Justice Department has found evidence that the leadership of Binance deliberately enabled risky and unlawful transactions to occur on multiple occasions.
According to the Department of Justice, Binance was aware that it provided services to customers in the US and therefore was required to register with FinCen and enforce measures against money laundering. However, the company chose not to comply.
According to officials, instead of implementing these safeguards, the company established a distinct platform called Binance.US in 2019. They also encouraged VIP customers to conceal their accounts and keep using the primary exchange.
According to the Department of Justice, Binance leaders, including Zhao, devised a strategy to reach out to VIP clients and assist them in setting up a new account for an offshore entity. They also urged US VIPs to share information indicating that the customer was not based in the US. This agreement was announced on Tuesday.
The company, aware of its American customers, neglected to implement measures that would prevent them from conducting trades with restricted areas such as Iran. As a consequence, there were over $898 million in trades between US and Iran-based users from January 2019 to May 2022.
According to the Department of Justice, Zhao instructed employees to prioritize seeking forgiveness over asking for permission. In addition, a compliance employee wrote in a message, “We should advertise ‘Come to Binance, where laundering drug money is made easy – we’ll even treat you to cake.'”
On Tuesday, Binance admitted to committing “criminal violations” in a statement.
“These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth,” the company wrote. “With the compliance and governance enhancements enshrined in our commitments, we can begin to share our vision for Binance’s exciting future and the future of the crypto industry.”
The company made it clear that the resolutions do not accuse Binance of misusing user funds or participating in market manipulation.
According to Binance, Richard Teng, previously the company’s global head of regional markets, will now assume the role of CEO.
According to court records reviewed by The New York Times, Binance will be obligated to comply with federal regulators’ conditions, including appointing a government monitor to supervise the company. Additionally, Zhao will not be allowed to participate in the company for three years after the monitor is appointed.
The Binance agreement did not include the Securities and Exchange Commission.
In June, the SEC filed a lawsuit against Binance and Zhao, claiming that they utilized businesses owned by Zhao to artificially raise trading prices and profit from customers. It was alleged that they commingled customer funds with Binance’s own funds.
The company stated in response at the time that they take the SEC’s accusations seriously, but believe they should not be the basis for an enforcement action, especially on an emergency basis. They plan to strongly defend their platform.
In summary, the company stated that any claims of user assets being at risk on the Binance.US platform are false. The company believes that the Staff’s actions are unjustified considering the amount of time they have had to investigate.
The substantial agreement was reached shortly after FTX’s creator, Sam Bankman-Fried, was convicted in federal court for deceiving customers on his widely-used digital currency platform, resulting in losses of billions of dollars.
The defense team for Bankman-Fried has pledged to combat the accusations.