The US Department of Justice (DoJ) is seeking more than $4 billion in penalties from Binance as part of a proposed resolution to end the years-long criminal investigation into the world’s largest cryptocurrency exchange by trading volume.
According to sources familiar with the matter, negotiations between the federal government and Binance indicated the possibility that the company’s founder and CEO, Changpeng “CZ” Zhao, would face criminal charges in the US for alleged money laundering, bank fraud, and sanctions violations.
Justice Department Asks Binance To Pay $4 Billion In Penalty To Settle Criminal Lawsuit
The potentially largest financial penalty levied against any company by the US government brings an end to the longstanding investigation that has seen Binance face a string of legal and regulatory headaches in the country.
Binance US, Binance’s subsidiary in the States, has been under the Justice Department’s investigation since at least 2018. In 2020, Reuters reported that federal prosecutors asked the company to provide internal records about anti-money laundering checks on its platform and communications involving Zhao.
Fast forward to June, and the Securities and Exchange Commission (SEC) sued both Binance and its CEO for operating an “elaborate scheme to evade US federal securities laws” by facilitating the sale of unregistered securities in the form of cryptocurrencies to retail investors, which the agency considers as securities offerings.
Binance refuted the accusations and said it would “vigorously defend” itself and its platform. The case led to an exodus of company executives and negatively affected its market share.
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Analysts Say Crypto Industry Has Removed The Biggest Obstacle To The Bull Market Rally
Crypto traders and analysts are now breathing a sigh of relief for the broader market. The market’s reaction to the news suggests that the DOJ’s decision does not pose a systemic risk to the sector.
After the news came out, Bitcoin (BTC) was reportedly trading at $37,724 – up over 1%, while BNB rose by 6% to trade at $263.
Richard Galvin, co-founder of Digital Asset Capital Management, said a resolution to the Binance investigation would be “unequivocally positive” given the exchange’s dominance in crypto liquidity. He also noted that investors are digesting a strong market-wide rally over the past few weeks.
Meanwhile, Cici Lu McCalman, founder of blockchain advisors Venn Link Partners, said that Binance settling the criminal lawsuit would mean the crypto industry has finally removed “the biggest obstacle” to the launch of a bull market next year.
Sharing his thoughts on the potential resolution of the probe into Binance, Zaheer Ebtikar, founder of the crypto VC Split Capital, said that the news was better than the potential launch of Bitcoin ETFs.
Binance Seeking A Deferred Prosecution Agreement With The Justice Department
Sources say that Binance is seeking a deferred prosecution agreement in the case, which means that the Justice Department will file a criminal complaint against the company but will not prosecute the corporation if it meets three specific requirements.
The money laundering and asset recovery section of the Justice Department’s criminal division and the national security division of the US Attorney’s Office in Seattle, which has been leading the investigation, will require Binance to first pay $4 billion in fines.
Secondly, the company will have to publish a document admitting where it violated federal laws. Lastly, the government would establish a monitoring program to ensure the crypto exchange’s future compliance with laws and regulations, and Binance will have to follow the approach from there onwards.
Leading crypto advocate, investor, and CEO of Galaxy Digital, Mike Novogratz said that he is personally hoping for a settlement so that the industry can move forward. A final decision on the DOJ vs Binance lawsuit would provide much-needed regulatory clarity and also set a precedent for how other crypto service providers might have to deal with a similar situation.
” The crypto market has been recovering from the massive losses it suffered in 2022. Bitcoin has surged over 100% this year as the market is eagerly awaiting a decision from the SEC to approve the first US spot Bitcoin exchange-traded funds (ETFs). ”
During the height of the crypto market in 2021, when BTC was trading above $50,000, Binance generated at least $20 billion in revenue from trading volume and fees on its platform.
CZ currently resides in the United Arab Emirates. Although the UAE does not have an extradition treaty with the United States, the Binance CEO could willingly surrender to federal authorities to face criminal charges.
At the time of writing, BNB is trading at $260.28 – up 5% in the last 24 hours.