DOJ Secures Guilty Plea from World Largest Cryptocurrency Exchange
A coordinated effort between federal law enforcement led to a guilty plea from the world’s largest cryptocurrency exchange and its CEO.
Binance Holdings Limited, owner of the popular exchange Binance.com, and CEO Changpeng Zhao, also known as “CZ,” pleaded guilty to various federal charges. The company was fined $4.3 billion, one of the largest corporate fines in U.S. history.
Binance, which was at the forefront of the boom in cryptocurrency over the last few years, pleaded guilty to violating the Bank Secrecy Act, violating the International Emergency Economic Powers Act (IEEPA), and failing to register as a money transmitting business.
Zhao, who resigned as CEO, pleaded guilty to failing to maintain an effective anti-money laundering (AML) program.
“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 U.S. history,” said Attorney General Merrick B. Garland. “The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
Growth Over Compliance
According to court documents, Binance and CEO Zhao admitted to prioritizing growth and profits over compliance with U.S. law. That included a failure to implement controls and procedures to prevent money laundering, as well as failing to implement controls to prevent U.S. customers from conducting transactions with customers in sanctioned jurisdictions.
Prosecutors say Binance also took steps to maintain a substantial number of large U.S. customers, even after suspending the site in the U.S. and setting up a separate exchange called Binance.US.
In addition, prosecutors say Binance failed across the board on implementing an effective AML program and did not implement know-your-customer (KYC) protocols, allowed users to open accounts and trade without submitting identifying information, and never filing a suspicious activity report (SAR) with the Financial Crimes Enforcement Network (FinCEN).
“A corporate strategy that puts profits over compliance isn’t a path to riches. It’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco.
Coordinated Effort
The guilty plea is part of coordinated resolutions with the Treasury Department’s FinCEN and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC).
“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. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry.”
Internal Revenue Service- Criminal Investigation (IRS-CI) is continuing the investigation.
Zhao, a Dubai resident and United Arab Emirates citizen, was ordered to stay in the United States until further notice, while a federal court in Seattle determines whether he will be able to leave for Dubai before his sentencing hearing in February.