Binance Holdings Limited, the operator of the world's largest cryptocurrency exchange, Binance.com, has pleaded guilty to multiple charges and agreed to pay a staggering $4 billion to settle an investigation by the US Department of Justice (DOJ).
Binance, which admitted that it allowed transactions with Hamas and other terrorist groups on the platform, was charged with three counts, including anti-money laundering, operating an unlicensed money-transmitting business and violating US sanctions. The exchange is paying a criminal fine of $1.8 billion and forfeiting $2.5 billion, according to court filings unsealed Tuesday.
According to the government, Binance failed to report suspicious transactions with terrorists. As part of its settlement, the company will have to file those reports going forward and review past activity it should have disclosed.
“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen.
Binance's guilty plea is part of coordinated resolutions with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC), as well as the US Commodity Futures Trading Commission (CFTC).
The agreed-upon penalties, totalling over $4 billion, are described by Attorney General Merrick B. Garland as one of the largest corporate penalties in US history. The penalties include forfeiture and a criminal fine.
“This will advance our criminal investigations into malicious cyber activity and terrorism fundraising, including the use of cryptocurrency exchanges to support groups such as Hamas,” Garland said.
“Any institution, wherever located, that wants to reap the benefits of the US financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences,” Yellen added.
As per the US Department of Justice, court documents also reveal that Binance prioritised growth and profits over compliance with US law from its launch in 2017. Despite announcing a block on US customers in 2019, the exchange took steps to retain high-value US customers, including encouraging them to register new accounts for offshore entities.
The Justice Department accused the company — as well as top executives, including Zhao — of concealing the fact that it was evading US laws aimed at stemming the flow of illicit funds throughout the world. According to the petition, Binance engaged in a "deliberate and calculated effort" to profit from the US market without establishing required safeguards between August 2017 and October 2022.
The founder and CEO of Binance, Changpeng Zhao, also entered a guilty plea. As part of the plea agreement, Zhao has resigned as CEO of Binance and Richard Teng will succeed Zhao as CEO.
The company has also agreed to enhance its compliance programme and appoint an independent monitor for three years. Binance’s multibillion-dollar fine reflects a 20% discount for “partial cooperation” with the investigation, the agreement states.
Zhao faces as many as 10 years in prison but is expected to get no more than 18 months under a plea deal that appears to have saved him from the harsh penalties that other prominent crypto criminals have faced. The Justice Department hasn’t decided yet what length of a prison term they will seek for him.
The Justice Department recently prosecuted FTX co-founder Sam Bankman-Fried in New York for allegedly orchestrating a multibillion-dollar misappropriation of customer funds that led to the cryptocurrency exchange’s collapse. Bankman-Fried was convicted of fraud following a high-profile criminal trial.
Both the CFTC and Securities and Exchange Commission sued Binance and Zhao earlier this year alleging a range of violations, including mishandling customer funds and allowing Americans to illegally access the platform. Tuesday’s settlement resolves the CFTC case but the SEC lawsuit is ongoing.
(With inputs from Bloomberg)
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