Binance Breaks Records In $4.3bn Criminal Settlement With US Agencies

November 23, 2023
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After months of speculation over a potential criminal case against Binance, the US Department of Justice has published details of charges, convictions and a historic settlement all in one day.

After months of speculation over a potential criminal case against Binance, the US Department of Justice (DOJ) has published details of charges, convictions and a historic settlement all in one day.

On Tuesday (November 21), US attorney general Merrick Garland announced that Binance has pleaded guilty to crimes that include money laundering offences, know your customer (KYC) failures and violations of the Bank Secrecy Act (BSA).

As part of the “largest corporate resolution” in US history, Binance has agreed to pay $4.3bn to resolve the DOJ’s investigations, which also cover sanctions and unregistered money transmitter offences.

Garland said that Binance, which launched in 2017, had become the world’s largest crypto exchange partly “because of the crimes it committed”.

“From the very beginning, Binance executives engaged in a deliberate and calculated effort to profit from the US market without implementing the controls required by US law,” he said.

“Binance’s own compliance personnel also knew that the company’s anti-money laundering procedures were inadequate and would attract criminals to the platform.”

In his prepared remarks, Garland quoted an exchange from a 2019 chat thread obtained by the DOJ.

In the thread, one compliance employee suggests to another that Binance should have a banner that says: “Is washing drug money too hard these days? Come to Binance: we got cake for you.”

In a company statement shared with Vixio, Binance said it acknowledges these failures but will "emerge as a stronger company as we lay the foundation for the next 50 years".

“While Binance is not perfect, it has strived to protect users since its early days as a small start-up and has made tremendous efforts to invest in security and compliance,” it said.

“However, when Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming.

“Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way.”

Executive convictions

Binance founder Changpeng Zhao, 46, pleaded guilty in a personal capacity to failing to maintain an effective anti-money laundering (AML) programme in violation of the BSA.

Following the conviction, Zhao resigned as CEO with immediate effect, but said he would continue to work with Binance as a shareholder and as a consultant when required.

“Admittedly, it was not easy to let go emotionally, but I know it is the right thing to do,” Zhao said in a statement.

“I made mistakes and I must take responsibility. This is best for our community, for Binance, and for myself.”

In his place, Richard Teng will take over as CEO, stepping up from his previous role as global head of regional markets.

“It is an honour and with the deepest humility that I step into the role of Binance’s new CEO,” said Teng.

“To ensure a bright future, I intend to use everything I’ve learned over the past three decades of financial services and regulatory experience to guide our remarkable, innovative and committed team."

Prior to joining Binance, Teng served for six years as CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market (ADGM).

Prior to the ADGM, he served for seven years as chief regulatory officer at Singapore Exchange (SGX) and for 13 years as director of corporate finance at the Monetary Authority of Singapore (MAS).

In June 2023, following a previous promotion at Binance, Vixio reported that Teng may be being positioned to take over from Zhao as global CEO.

A complex settlement

Binance’s guilty plea is part of a coordinated set of resolutions with multiple US agencies, including the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC) and the Commodity Futures Trading Commission (CFTC).

At FinCEN and OFAC, two agencies under the US Treasury, Binance agreed to settlements of $3.4bn and $968m respectively. In both cases, these are the single largest settlements in the history of each agency.

Binance settled with FinCEN and OFAC for violations of the BSA and violations of multiple sanctions programmes.

The violations include failure to implement programmes to prevent and report suspicious transactions with terrorists, ransomware attackers, money launderers and other criminals.

Since 2017, according to OFAC, Binance has been used by Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al-Qaeda and the Islamic State of Iraq and Syria (ISIS).

OFAC also found that Binance had facilitated more than 1.67m trades between US users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, North Korea and Crimea. In total, Binance enabled nearly $900m in transactions between US and Iranian users.

“Binance turned a blind eye to its legal obligations in the pursuit of profit,” said Janet Yellen, Treasury secretary.

“Any institution, wherever located, that wants to reap the benefits of the US financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries and crime or face the consequences.”

FinCEN’s settlement imposes a five-year monitorship on Binance and requires significant compliance undertakings, including a “complete exit” from the US market.

OFAC’s settlement requires Binance to abide by a series of “robust” sanctions compliance obligations, including full cooperation with the monitorship overseen by FinCEN.

The Treasury will retain access to the books, records and systems of Binance for five years, and failure to comply with these obligations could result in additional penalties.

CFTC settlement and the case of Samuel Lim

Finally, Binance has also settled all charges with the CFTC. In March, the CFTC alleged multiple violations of the Commodity Exchange Act (CEA) by Binance, including knowingly operating an illegal derivatives exchange.

Both Zhao and Samuel Lim, former chief compliance officer at Binance, were named as defendants by the CFTC.

The settlement requires Binance to disgorge $1.35bn of “ill-gotten gains” and pay a $1.35bn civil monetary penalty to the CFTC. It also obliges Zhao to pay a $150m civil penalty.

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