Binance CEO Changpeng “CZ” Zhao to Plead Guilty
- The settlement would see Binance CEO CZ step down from his role at the exchange.
- It is currently unclear if CZ will face jail time.
- The SEC charged Kraken with operating without a license.
Binance CEO and founder Changpeng “CZ” Zhao plans to step down from his role at the exchange and enter a guilty plea for violating US anti-money laundering policies. According to a Wall Street Journal report, the move is part of Binance’s ongoing negotiations with the Department of Justice (DOJ). The settlement would see Binance pay $4 billion, and the DOJ would drop all charges against the exchange.
Despite planning to step down as CEO, CZ will reportedly remain the majority stakeholder in the exchange. However, CZ will not be allowed to hold an executive role at Binance and will pay a $50 million fine.
The DOJ accused Zhao and other Binance executives of breaking US economic sanctions and the Bank Secrecy Act by neglecting to implement an anti-money laundering program. Sources reveal that Binance’s former chief compliance officer, Samuel Lim, will face charges as well.
Regulators also claimed that Binance operated as an unauthorized money-transferring business, profiting from the US market and violating the International Emergency Economic Powers Act.
The settlement ends the DOJ’s investigation into Binance. US regulators opted for a softer deal in the case against Binance. So, rather than collapsing the exchange and affecting the entire crypto industry, the deal allows Binance to carry on with its operations.
CZ took to Twitter to confirm his departure from Binance and announced a new CEO. He wrote:
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself. Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has.
CZ named Binance’s head of regional markets outside of the U.S., Richard Teng, as the company’s new CEO. The crypto billionaire also expressed plans to “remain available to the team to consult as needed, consistent with the framework set out in our U.S. agency resolutions.”
Binance Has Been the Subject of Investigation in the US
Binance launched in 2017 and became the leading trading platform globally within its first 180 days. Data from CoinMarketCap shows that the exchange had over $11.6 billion in trading volume in the past 24 hours. This is a significant 515% increase from the $1.9 billion recorded by the second-largest crypto exchange, Coinbase.
The DOJ began its inquiry into Binance in 2018. In 2020, US authorities requested internal documents from the exchange regarding its efforts to tackle money laundering, as well as interactions with Zhao from 2017.
The U.S. Commodity Futures and Trading Commission (CFTC) filed a lawsuit accusing Binance of failing to implement an adequate anti-money laundering program to identify and stop terrorism financing. The CFTC claimed that several of the exchange’s employees admitted that the platform enabled “potentially illegal activities.”
At the time, CZ dismissed the lawsuit as a mere recitation of facts. The SEC also filed a separate suit accusing Binance of manipulating its trading volume, failing to restrict US users from its global platform, misleading investors about its surveillance measures, and diverting customer funds.
The crypto market has already suffered a number of high-profile failures, including the bankruptcy of the former crypto exchange FTX. Many believe Binance’s collapse would have been irrecoverable for the industry.
US regulators are pursuing enforcement actions against other crypto platforms. The SEC recently charged Kraken with operating as an “unregistered securities exchange, broker, dealer, and clearing agency.” The exchange previously paid a $30 million fine for the SEC’s charges in February.