Changpeng Zhao, widely known as CZ, will step down from Binance, the crypto company he founded in 2017, as part of a deal with the Department of Justice and U.S. regulators.
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Changpeng Zhao, widely known as CZ, will step down from Binance, the crypto company he founded in 2017, as part of a deal with the Department of Justice and U.S. regulators.
Patricia De Melo Moreira/AFP via Getty Images
The founder and CEO of Binance, Changpeng Zhao, agreed to plead guilty to money laundering violations and to step down from the world’s largest crypto exchange as part of a sweeping settlement with U.S. law enforcement and financial regulators.
CZ, as he’s widely known, will also pay a $50 million fine, while Binance will pay $4.3 billion in fines as part of the deal. The settlement will allow Binance to continue operating.
The announcement from the Department of Justice, Treasury Department and Commodity Futures Trading Commission comes less than a month after federal prosecutors convinced a jury to find CZ’s one-time rival, FTX founder Sam Bankman-Fried, guilty of seven criminal charges, including fraud and money laundering.
“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 in a statement.
The DOJ said it plans to maintain its aggressive stance against crypto players.
“In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases,” the attorney general said. “The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”
Regulators issue warning to other crypto players
The deal ends investigations by the DOJ and the commodities regulator into Binance — though the company could still face hefty penalties from the Securities and Exchange Commission.
“The result of these agreements will be an end to company behavior that has posed risks to the U.S. financial system, U.S. citizens, and our country’s national security for too long,” said Treasury Secretary Janet Yellen, in a statement.
She also warned other crypto players they need to adhere to U.S. regulations.
“If virtual currency exchanges and financial technology firms wish to realize the tremendous benefits of being part of the U.S. financial system and serving U.S. customers, they must play by the rules,” Yellen said. “And if they do not, the U.S. government will take action.”
In a statement, Binance said it was “not perfect” and admitted that it did not have proper compliance controls, but said it always sought to “protect users since its early days.”
“These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth,” Binance said.
A major player in crypto
A one-stop shop for investors in cryptocurrencies and other digital assets, Binance is emblematic of the borderlessness of the new crypto economy.
It has no official headquarters, and CZ — who has become a well known player in crypto — has spent much of his adult life moving from city to city, mostly in Asia and the Middle East.
Last year, Binance saw its market share grow after FTX collapsed. But in recent months, users fled to other cryptocurrency exchanges as the SEC and other regulators scrutinized Binance’s business.
The company has also seen top executives leave while cutting thousands of jobs worldwide.
As chair of the Securities and Exchange Commission, Gary Gensler has cracked down on cryptocurrency players.
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As chair of the Securities and Exchange Commission, Gary Gensler has cracked down on cryptocurrency players.
Drew Angerer/Getty Images
Though the settlement marks a major reprieve for Binance, it’s legal troubles are far from over.
The SEC, under Chair Gary Gensler, has aggressively targeted the cryptocurrency industry under existing regulations.
The SEC has accused CZ and Binance of engaging “in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law” over its operations.
The charges include accusations that Binance and CZ did not clearly separate its U.S. and international businesses as required by current regulations, and allowed illicit activities such as money laundering to take place at the crypto exchange.
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