The U.S. Department of Justice has accused Binance and its billionaire founder and CEO, Changpeng Zhao, of committing criminal offenses. Mr. Zhao has agreed to admit guilt for breaching and causing a financial institution to breach the Bank Secrecy Act in a plea agreement. The U.S. DOJ stated in their filing on Tuesday that Binance "knowingly and wilfully" provided services to Iran in opposition of U.S. sanctions.
Changpeng Zhao, Chief of Binance, has agreed to a plea deal with the Department of Justice, whereby he will accept criminal charges and resign from his role as CEO in exchange for a $4.3 billion settlement. This agreement resolves the years-long investigation into the world's largest crypto exchange. Zhao is being charged with violations of the Bank Secrecy Act, such as failing to maintain an effective anti-money laundering program, and for willfully violating economic sanctions enforced by the United States. For this, he will plead guilty and a $50 million fine has been recommended by the DOJ.
Additionally, Binance will still remain operational, though stricter compliance measures will be put in place. These include maintaining a program that adheres to anti-money laundering standards and appointing an independent compliance monitor. The court-filed case reveals three criminal charges against the exchange, including operating an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and a conspiracy charge. Consequently, Binance has agreed to forfeiting $2.5 billion and paying a fine of $1.8 billion.
The U.S. DOJ has accused Binance of "knowingly and willfully" violating U.S. sanctions. A joint statement from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) noted that Binance is facing a multitude of legal issues. In fact, the SEC filed a lawsuit in June alleging the exchange was conducting a securities exchange without authorization and mishandling customer funds, and the CFTC launched its own case on similar grounds.
Kraken was also recently targeted by the SEC, who claims that the exchange commingled $33 billion in customer crypto assets with its own.
Starting in 2017, Binance quickly grew to be the world's largest crypto exchange in terms of trading volume and has since become a major player in the industry. Nevertheless, its aggressive approach to market entry without first taking the necessary permission from certain jurisdictions has been met with intense regulatory scrutiny.
The SEC and CFTC's suits against Binance starkly demonstrate that the agency is taking a hard stance against crypto companies that don't hold up to the standards and regulations enforced by the U.S. government. As a result, the implications of the agency's crackdown may extend far beyond Binance and other exchanges, affecting tokens, blockchains and the crypto industry as a whole.
Changpeng Zhao is set to make a plea before Judge Brian Tsuchida at 10:00 a.m. Pacific Time (1:00 p.m. ET) and will face a $50 million fine if the deal is accepted by the court. CNBC has reached out to Zhao for a comment, but no response has been received yet.
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