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Binance’s CEO has pleaded guilty to failing to maintain an effective anti-money laundering programme and has resigned, but remains the majority shareholder of Binance.
Binance and its CEO Changpeng Zhao have plead guilty to US charges and the crypto exchange has agreed to pay more than $4bn to resolve the investigation.
The US justice department claims the company admitted to engaging in unlicenced money transmitting and sanctions violations. Meanwhile, the founder and CEO pleaded guilty to failing to maintain an effective anti-money laundering programme and has resigned as CEO.
In a statement, Binance said it acknowledged its responsibility for historical, criminal compliance violations and that the resolution will allow it to “turn the page on a challenging yet transformative chapter of learning and growth”.
“When Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have,” the company said. “Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation and Binance made misguided decisions along the way.”
The company said its resolutions do not allege that it misappropriated any user funds or that it engaged in market manipulation. Zhao is being replaced by Binance’s Richard Teng, but he will still be the company’s majority shareholder and a “resource available for consultation”.
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in US history,” said US attorney general Merrick B Garland. “In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases.
“The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
Tough times for crypto
Nigel Green, the CEO of financial consultancy firm deVere Group, said Binance’s CEO has been one of the most influential and powerful people in the crypto sector and predicts that the scandal will trigger “some short-term volatility” in the market.
“However, the crypto market will thrive as institutional money is pouring in and we expect it to continue to do so,” Green said.
The resolution against the world’s largest crypto exchange comes less than a month after the founder of FTX – Sam Bankman-Fried – was found guilty of seven charges brought against him, which included conspiracy to commit wire and commodities fraud on FTX customers and investors, along with conspiracy to commit money laundering.
The crypto sector has been dealing with both the fallout of the FTX collapse last year and a crackdown by US regulators, with the Securities and Exchange Commission (SEC) suing both Binance and Coinbase earlier this year.
The SEC accused Binance of engaging in “an extensive web of deception”, failing to disclose certain details to investors and secretly operating its US trading platform from behind the scenes. Both SEC cases are still ongoing.
Yesterday, the SEC charged crypto exchange Kraken with allegedly operating as an unregistered securities business. Kraken called the SEC charge “incorrect as a matter of law, false as a matter of fact and disastrous as a matter of policy”.
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