Changpeng “CZ” Zhao, the billionaire CEO of Binance, has stepped down from his role as the chief executive of the cryptocurrency exchange as part of a major settlement agreement with the US Department of Justice.
Last Tuesday, multiple regulatory agencies, including the Commodities Futures Trading Commission (CFTC), the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC), announced that they will be ending the year-long investigations into the company by settling the case with a $4.3 billion penalty. The amount is considered to be one of the largest penalties ever issued by the US government to a corporate defendant.
Binance Settles US Government Lawsuit By Agreeing To Pay $4.3 Billion In Fines
According to a court filing unsealed on November 22, Binance was accused of failing to maintain a proper anti-money laundering program, operating an unlicensed money-laundering business, and violating US sanctions law.
CZ appeared in a federal court in Seattle to plead guilty to violations of the Bank Secrecy Act, anti-money laundering, and sanctions violations. He also agreed to pay a $50 million fine, which will be credited against the amount he owes to the CFTC, according to the Department of Justice.
During a press conference, US Attorney General Merrick Garland said that Binance employees “knew and discussed” about serving “thousands of users” in sanctioned countries and knowingly violated US law by facilitating transactions between US users and users in sanctioned countries.
The Securities and Exchange Commission (SEC) previously sued Binance and Zhao in June for operating an unregistered exchange and misleading investors by using a Switzerland-based network called Sigma Chain, which was also owned by CZ, to inflate the trading volumes on Binance US – the US-based affiliate of the leading crypto exchange.
At the time, SEC chairman Gary Gensler said that Zhao and Binance entities “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Garland added that the $4.3 billion overall fine will include certain amounts that will be credited to each agency that has filed lawsuits, such as $1 billion to the CFTC, $3.4 billion to FinCEN, and $968 million to the OFAC.
Meanwhile, Treasury Secretary Janet Yellen noted that Binance’s settlement with the Treasury Department’s money laundering and sanctions department was the largest in the federal agency’s history.
Changpeng “CZ” Zhao Will Step Down As CEO While Binance Will Be Forced To Report Compliances for 3 Years
Under the plea deal, Binance will have to appoint an independent compliance monitor for three years and report its compliance efforts to the DoJ. Founder and former CEO Chanpeng Zhao will be prohibited from “any present or future involvement in operating or managing” the company until three years after the monitor is appointed.
The court document noted that Zhao “prioritized Binance’s growth, market share, and profits over compliance” and told his employees that it was “better to ask for forgiveness than permission”. It is alleged that Binance US did not collect “know-your-customer” information from users as Zhao believed it would inhibit the platform’s growth and appeal.
According to court filings, Zhao’s staff warned him that the exchange was serving users from sanctioned countries and was putting it at risk of breaking multiple US laws. The warnings were ignored by the CEO.
DoJ Deputy Attorney General Lisa Monaco said over the five years “while building a business with US customers”, Binance serviced nearly $1 billion in illegal payments involving “sanctioned countries and individuals”. Also adding that the agency’s action against Binance “sent an unmistakable message to crypto and DeFi companies”.
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Former ADGM Executive Richard Teng Named New Binance CEO
Zhao has been replaced by the former head of Binance’s regional markets and the CEO of the Financial Services Regulatory Authority of the Abu Dhabi Global Markets (ADGM), Richard Teng.
However, CZ’s resignation will not be a complete departure from the company, as the founder will remain its majority shareholder, and “a resource for consultation on historical areas of the business.”
Zhao said that moving forward, he will engage in passive investing or being a minority shareholder in different crypto projects.