Billionaire Changpeng Zhao, CEO of the world’s largest cryptocurrency exchange, Binance, is expected to plead guilty to money laundering violations as part of a settlement with the US government that would ease the intense cloud of legal scrutiny hovering over the company, a person familiar with the matter tells CNN. Binance is also expected to expected to plead guilty to the charges.
As part of the agreement, Binance has agreed to pay $4.3 billion in fines and other penalties, a second source tells CNN.
Changpeng Zhao, the founder and CEO of Binance, has accumulated a substantial fortune, with Bloomberg estimating his wealth at over $23 billion.
News of the deal, reported earlier by The Wall Street Journal, comes as US officials say they plan to announce a “major illicit financial enforcement action” related to cryptocurrencies later on Tuesday at an event that will include Attorney General Merrick Garland and Treasury Secretary Janet Yellen.
The U.S. Treasury declined to provide comments, and Binance did not respond to requests for comments.
What Binance allegedly did wrong
On Tuesday, federal prosecutors unsealed court records alleging Binance, led by Zhao, processed transactions by customers who operated illicit mixing services and “laundered proceeds of darknet market transactions, hacks, ransomware, and scams.” Prosecutors allege that Binance had lax anti-money laundering procedures.
Prosecutors allege that This misconduct paved the way for Binance to become king of the crypto exchanges.
“In part because of this scheme, and because Defendant prioritized growth, market share, and profits over compliance with US law (Binance), it became the largest cryptocurrency exchange in the world,” prosecutors said.
Prosecutors contend that Binance consciously neglected to register as a money service business, intentionally violated the Bank Secrecy Act by failing to establish and maintain a robust anti-money laundering program, and purposefully contributed to breaches of U.S. economic sanctions.
The charges, filed in the US District Court for the Western District of Washington, accused Binance of a “deliberate and calculated effort to profit from the US market without implementing controls required by US laws.”
Prosecutors allege the misconduct started as early as August 2017, continued until at least October 2022, and included certain Binance officers, directors, employees, and agents.
What is Binance?
Binance was founded in 2017 by Zhao, a Canadian national. This year, US market regulators brought civil cases against Binance, which they accused of running an illegal exchange for unregistered securities in the United States. In June, the Securities and Exchange Commission sued Binance, accusing the company of running an “extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” Binance has consistently argued that it is not subject to US laws due to the absence of a physical headquarters in America.
The SEC they were alleged that Zhao and Binance commingled customer assets and even diverted some to an entity controlled by Zhao.
Zhao asserts that the company’s headquarters are wherever he is at any given time, reflecting a deliberate approach aimed at evading regulation, as stated in a Commodity Futures Trading Commission complaint. That agency accused Binance and Zhao of violating US derivatives trading laws in multiple ways, including allegedly secretly coaching “VIP” customers within the United States on how to evade compliance controls.
A spokesperson for Binance said in June that the company takes the SEC’s allegations seriously, but it believes the agency’s accusations are “unjustified.”
“We respectfully disagree with the SEC’s allegations that Binance operated as an unregistered securities exchange or illegally offered and sold securities,” the company said in a statement. “Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a US regulatory tug-of-war.”
This is a developing story. It will be updated.