Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Binance CEO Changpeng Zhao has resigned after pleading guilty to a US charge of failing to protect against money laundering after federal prosecutors unveiled a sweeping case against the world’s largest cryptocurrency exchange.
The crypto casino also pleaded guilty to a number of criminal charges related to money laundering and breaching international financial sanctions, agreeing to pay more than $4.3 billion. in fines, US authorities said on Tuesday.
Within five years, Binance grew from a start-up to an exchange giant with employees in dozens of countries. By November 2022, it controlled more than half of the crypto market.
Yet for years its success has been shrouded in secrecy: the company has insisted it has no headquarters and has had countless run-ins with regulators around the world.
The crypto sector’s links to terrorist financing have come under renewed scrutiny following Hamas’ attacks on Israel last month. In the wake of the attack, Israel closed more than 100 Binance accounts, the FT has reported.
The US Treasury Department said on Tuesday that the exchange failed to report “well over 100,000 suspicious transactions” linked to ransomware attacks, child sexual abuse, large-scale hacks, drug trafficking and terrorist groups including al-Qaeda and Isis.
“Partly because of the crimes committed, Binance became the largest cryptocurrency exchange in the world,” said US Attorney General Merrick Garland. “Now Binance has paid one of the largest corporate fines in US history.”
Zhao, one of the crypto industry’s most outspoken and influential leaders, entered his plea in federal court in Seattle on Tuesday and also agreed to pay a $50 million fine. “I made a mistake and I have to take responsibility,” he said on social media platform X, where he confirmed his resignation.
Richard Teng, who previously served as Binance’s global head of regional markets, will replace Zhao as CEO.
In 2021, the US Department of Justice created a new unit focused on the criminal misuse of digital assets, as the Joe Biden administration has emerged as one of the jurisdictions with the toughest stance on crypto worldwide.
“Using new technology to break the law does not make you a disrupter,” Garland said Tuesday. “That makes you a criminal.”
Tuesday’s agreements also resolve a case filed by the Commodity Futures Trading Commission, which in March accused Binance and Zhao of operating illegally in the United States. The CFTC’s civil complaint alleged that much of the group’s reported trading volume and profitability came from “extensive solicitation of and access to” US clients, contradicting the exchange’s claims.
In June, the US Securities and Exchange Commission filed 13 civil charges accusing Binance of violations, including commingling billions of dollars of customer cash with a separate trading firm owned by its CEO that operates unregistered exchanges, broker-dealers and clearinghouses. The SEC was not named in the decisions announced Tuesday and declined to comment.
Binance admitted to anti-money laundering, unlicensed money transfer and sanctions violations, authorities said. The alleged misconduct occurred between at least August 2017 and October 2022, according to court documents.
Mark Kornfeld of the law firm Buchanan Ingersoll and Rooney said: “DoJ action against the main crypto player is a very important development for this industry as a whole. This is proof that this is the new normal, not just a random development for the industry, everyone is pretty much on notice that this is how it’s going to be.”
In its March lawsuit, the CFTC also alleged that Binance knowingly facilitated potentially illegal activities. In one case in 2019, Binance received information “about Hamas transactions”. A Binance employee reportedly dismissed the risk, saying “600 bucks can hardly buy an AK-47”.
A year later, the CFTC said a Binance executive said certain customers — including some from Russia — were “here for crime.” A colleague reportedly replied: “We see the bad, but we turn a blind eye.”
Additional reporting by James Politi in Washington