Binance, the world’s largest cryptocurrency exchange platform — where users from across the globe buy and sell electronic forms of money — admitted to violating U.S. laws to prevent money laundering and sanctions violations and agreed to pay the government $4.3 billion in fines and fees, the Justice Department announced Tuesday. CEO Changpeng Zhao has also pleaded guilty to one federal charge.
Binance has been under investigation by numerous regulators and law enforcement agencies, including the Commodities Futures Trading Commission. The company acknowledged Tuesday that it did not take proper steps to prevent money laundering on its platform and operated illegally in the U.S., permitting traders in nations currently sanctioned by the federal government — like Iran — to engage in business deals with Americans.
The platform’s founder and chief executive, Zhao, a Canadian national, pleaded guilty in a federal court on Tuesday to violating anti-money laundering laws and agreed to step down from Binance’s leadership. He faces a sentence of approximately 1 to 10 years in prison, with sentencing set for next year.
Zhao tweeted that stepping down as CEO was demanding. “Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, Binance, and myself,” he posted. He added that Richard Teng, the global head of regional markets, will be the new CEO.
Federal investigators alleged the cryptocurrency exchange, which processes billions of dollars in trades, illegally profited by allowing darknet actors and ransomware hackers to operate on the platform and did not properly screen for other illicit services.
Between January 2018 and May 2022, prosecutors alleged Binance processed 1.1 million transactions totaling nearly $900 million between Americans and individuals believed to be in Iran. Zhao and company executives were allegedly aware that exchanging American money would require the platform to follow U.S. sanctions laws but also saw users in the U.S. as vital to growth.
A separate exchange — Binance.US — was set up for use by American cryptocurrency traders, but investigators alleged Americans remained on the original, unregulated Binance platform, too.
“The purpose of the conspiracy was to allow Binance to operate as a virtual currency exchange and gain market share and profit as quickly as possible,” according to the criminal information to which the company pleaded guilty. The defendants allegedly encouraged high-value clients to “conceal and obfuscate their U.S. connections,” court documents said.
Attorney General Merrick Garland, Treasury Secretary Janet Yellen, Deputy Attorney General Lisa Monaco, and other federal officials announced the multi-billion-dollar settlement on Tuesday.
“Binance was allowing illicit actors to transact freely, supporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions,” Yellen told reporters Tuesday. “That includes transactions associated with terrorist groups like Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda and ISIS.”
“Using new technology to break the law does not make you a disruptor,” Garland said. “It makes you a criminal.”
“Binance became the world’s largest cryptocurrency exchange partly because of the crimes it committed,” Garland said. “Now it is paying one of the largest corporate penalties in U.S. history.”
Zhao, the founder of the company established in 2017, entered a guilty plea for failing to maintain adequate anti-money laundering programs. According to Tuesday’s criminal information, he admitted to knowingly disregarding specific filtration processes for bad actors on his platform and failing to file suspicious activity reports with regulators.
Part of the platform’s agreement with the Justice and Treasury Departments includes a provision that Binance will continue to cooperate with U.S. laws, submit suspicious activity reports, and appoint a new CEO with a background in compliance, according to Justice Department officials.
Binance is still fighting an unrelated lawsuit filed by the Security and Exchange Commission that alleges the company failed to register in the U.S. and illegally diverted investor funds to an account controlled by Zhao.
Binance has yet to respond to CBS News’ request for comment.
Binance’s agreement with the Justice Department comes just weeks after Sam Bankman-Fried — the founder of another cryptocurrency exchange, FTX — was found guilty of seven counts of fraud, conspiracy, and money laundering following the dramatic collapse of the platform. He was accused of using FTX funds on real estate and other projects unconnected to the business.
Justice Department officials said Tuesday they are constantly monitoring cryptocurrency exchanges for compliance and emphasized the need for emerging and disruptive companies to prioritize regulations over a company’s growth.
“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” Monaco said in a statement.