Binance and CZ plead guilty but SEC lawsuit remains

Binance and its CEO have pled guilty to felony charges related to violations of the Bank Secrecy Act, failure to register as a money services business, and failure to maintain an effective anti-money laundering program.

Under the conditions, Changpeng Zhao (CZ) has been forced to resign as Binance’s chief exec. The crypto exchange will pay $4.3 billion in order to resolve these criminal charges. 

Former Binance chief compliance officer Samuel Lim has also agreed to pay $1.5 million in civil penalties to the CFTC. Under the deal, Binance will be watched by “an independent compliance monitor” for the next three years, who will have the ability to see detailed information about Binance’s transactions and activities.

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“I am proud to point out that in our resolutions with the US agencies they do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation,” CZ wrote in his resignation post on X.

“Funds are SAFU!” he insisted.

Former Binance chief CZ still majority owner despite crimes

CZ’s indictment details how he knowingly violated US financial regulations in order to accelerate the growth of Binance, even specifically saying that it was “better to ask for forgiveness than permission.”

Zhao allegedly delayed implementing proper know-your-customer information at Binance, fearing that the extra hoops would put off new users. In August 2021, the firm announced that every customer would undergo KYC — but trading was possible without the safeguards until May 2022.

Binance’s indictment includes a quote from CZ: “If we blocked US users from day 1, Binance will not be as big as we are today. We would also not have had any US revenue we have had for the last 2 years.”

Under the plea deal CZ has agreed to, he will be allowed to maintain majority ownership of the crypto exchange that he founded in 2017. However, he has been barred from holding an executive role at the firm.

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Binance settlement resolves multiple US agency charges

According to the indictment, US-based Binance users were transacting with individuals in sanctioned jurisdictions, including Binance users in Iran. Steps Binance took to hide its users in the US included reclassifying them as ‘unknown.’

These shady practices allegedly continued even after Binance US was incorporated. ‘VIPs’ in the US were granted permission to trade on the main exchange — and users who didn’t “get the hint” were told “that IP is the sole reason why [they] can’t use .com.”

CZ and Binance’s deal has further resolved an existing case with the Commodity Futures Trading Commission (CFTC), and new charges from FinCEN and the Office of Foreign Assets Control (OFAC).

However, the Securities and Exchange Commission (SEC)’s case against Binance lives on. The SEC still alleges that BNB is a security, that Zhao-controlled entities were responsible for suspect flow of funds between Binance and Binance US, and that these Zhao-owned entities engaged in massive wash-trading.

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