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Binance and CEO Plead Guilty to Federal Charges in $4B Resolution

On November 21, 2023, Binance Holdings Limited, the company that operates the world's largest cryptocurrency exchange, Binance.com, pleaded guilty to and agreed to pay over $4 billion to resolve the Justice Department's investigation into violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA).



Changpeng Zhao, chief executive officer of Binance, speaks during an interview in Tokyo, Japan
Akio Kon/Bloomberg via Getty Images / Getty Images

Binance's founder and chief executive officer (CEO), Changpeng Zhao, also pleaded guilty to failing to maintain an effective anti-money laundering (AML) program, in violation of the BSA. Zhao has stepped down as CEO of Binance as part of the settlement.


The Charges

The Justice Department's investigation into Binance began in 2020. The investigation found that Binance had engaged in a number of violations of U.S. law, including:


  • Failing to register as a money transmitting business (MSB): As an MSB, Binance is required to register with the Financial Crimes Enforcement Network (FinCEN) and implement an AML program. Binance did not register with FinCEN or implement an effective AML program.

  • Violating the BSA: The BSA requires financial institutions to take steps to prevent their services from being used for money laundering. Binance did not take adequate steps to prevent its services from being used for this purpose.

  • Violating the IEEPA: The IEEPA prohibits U.S. persons from engaging in transactions with sanctioned countries. Binance did not take adequate steps to prevent U.S. persons from engaging in transactions with sanctioned countries.

The Settlement

As part of the settlement, Binance agreed to:

  • Pay a $1.2 billion criminal fine

  • Forfeit $2.8 billion in seized funds

  • Implement an effective AML program

  • Register as an MSB

  • Comply with the IEEPA


Binance also agreed to cooperate with the Justice Department's ongoing investigation into cryptocurrency exchanges.


The Impact on Binance and the Industry

The settlement is the largest criminal penalty ever imposed on a cryptocurrency exchange. It is also the first time that a cryptocurrency exchange has been charged with violating the IEEPA.


This whole situation is likely to have a significant impact on the cryptocurrency industry and it is a sign that the Justice Department is taking a serious approach to regulating cryptocurrency exchanges. It is also likely to make it more difficult for cryptocurrency exchanges to operate without complying with U.S. law.


Conclusion

The federal case against Binance and its CEO is a significant development in the cryptocurrency industry. The settlement is likely to have a major impact on the way that cryptocurrency exchanges operate. It is also likely to encourage other cryptocurrency exchanges to comply with U.S. law.


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