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Binance Holdings Ltd and its Chief Executive Officer Changpeng Zhao pleaded guilty to criminal charges for anti-money laundering and US sanctions violations, including allowing transactions with Hamas and other terrorist groups, under a sweeping deal with the Justice department designed to keep the company operating.
Binance agreed to plead guilty to criminal charges and pay over $4 billion in penalties. Zhao, who agreed to step down and pay a $50 million fine as part of the settlement, appeared in court in Seattle Tuesday to plead guilty.
The deal, which includes the Treasury Department and the Commodity Futures Trading Commission, ends a years-long investigation into the cryptocurrency exchange.
Binance’s violations included failure to prevent and report suspicious transactions with terrorists, including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and the Islamic State of Iraq and Syria, according to the Treasury department.
The announcement comes as Israel and Hamas have been embroiled in a war that broke out more than six weeks ago.
Binance allowed at least 1.1 million transactions, worth more than $898 million, involving customers in Iran, according to the court filing.
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now its paying one of the largest corporate penalties in U.S. history,” Attorney General Merrick Garland said in a press release.
Money from the fine will be split among DOJ, CFTC and other agencies. It includes $3.4 billion to the Treasury Department’s Financial Crimes Enforcement Network and $968 million to its Office of Foreign Assets Control over Bank Secrecy Act and sanctions violations.
“Binance turned a blind eye to its legal obligations in the pursuit of profit,” Treasury Secretary Janet Yellen said in a press release. “Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform.”
The settlement negotiated between the two sides will resolve all allegations of criminal wrongdoing.
Binance chose to “prioritize growth over compliance with US legal requirements,” allowing it to conduct billions of dollars in transactions without gathering required information on customers or monitoring transactions, the US said.
The Justice Department accused the company — as well as top executives, including Zhao — of taking steps to conceal that it was dodging US laws. The filing states that from about August 2017 until October 2022, Binance and Zhao were involved in a “deliberate and calculated effort” to profit from the US market without implementing controls required by law.
Binance “chose not to comply with U.S. legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain U.S. users,” according to the charging document.
Binance and its senior managers, from the company’s inception, tracked and monitored the user growth in the US, according to the complaint, which included a company graphic from 2017 that showed more than 23% of Binance’s users were from the US — a larger share than any other country.
The government said Zhao was well aware of the presence of US customers on the international exchange, writing in 2019 that if Binance blocked US customers from day one it “will be not as big as we are today.”
Zhao wrote that it was “better to ask for forgiveness than permission” and described the situation as a “grey zone.”
“I want to close the issue, I want to take responsibility and close this chapter of my life,” Zhao told the court during the hearing. Zhao said he was “a little bit scared” to come to the US to face his plea, but said he was reassured by the court’s thoroughness. “I will return.”
Zhao faces a maximum sentence of 10 years and fines up to $500,000, plus any profits he made from the alleged scheme. His lawyers said in court on Tuesday that his sentencing will be delayed by 6 months. Zhao’s agreement includes a waiver of his right to appeal, provided that his sentence doesn’t exceed 18 months, judge Tsuchida said during the plea hearing.
The Justice Department recently prosecuted FTX co-founder Sam Bankman-Fried in New York for allegedly orchestrating a multibillion-dollar misappropriation of customer funds that led to the cryptocurrency exchange’s collapse. Bankman-Fried was convicted of fraud following a trial.
Both the CFTC and Securities and Exchange Commission have sued Binance and Zhao alleging a range of violations, including mishandling customer funds and allowing Americans to illegally access the platform.
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