Binance-DoJ Deal – Five Things We Learned

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  • The crypto world was rocked yesterday when Binance was hit with a massive $4.3 billion fine and its CEO, Changpeng Zhao, stood down
  • The news came after a two-year investigation involving various US offices
  • What were they key takeaways from the explosive event?

The finance and crypto worlds were rocked yesterday when the Department of Justice (DoJ) announced a $4 billion+ set of fines for Binance over its long-running criminal investigation. Lots has been written and said following the explosive news, but what were the key takeaways? Let’s find out.

$4.35 Billion in Fines Settles CFTC Case

Yesterday’s agreement saw Binance plead guilty to violating the Bank Secrecy Act and the International Emergency Economic Powers Act and also failing to register as a money transmitting business. The fine is made up of $2.5 billion as a forfeit and $1.8 billion in criminal fines. Separately, it also reached agreements with the Commodity Futures Trading Commission (CFTC), The Financial Crimes Enforcement Network (FinCEN), and The Office of Foreign Assets Control (OFAC), with $1.8 billion worth of the fines going to those offices. These fines will be paid over 15 months.

$1.35 billion of the fine was the sum of the trading fees that Binance accrued through illegally offering its platform to US users and the amount is a record for the CFTC, which sued the exchange in March. Binance initially denied the charges

Zhao Could Face Prison

Changpeng Zhao pleaded guilty to a US criminal charge of failure to protect against money laundering, which resulted in an immediate $50 million fine and the possibility of an 18-month imprisonment down the road.

He has stepped down as Binance CEO and is prohibited from participating in Binance management in the future. He also signed a $175 million personal recognizance bond, securing his release until the sentencing hearing scheduled for February 23, 2024.

In an X post, Zhao admitted that he “made mistakes” for which he “must take responsibility.” He also noted that the DoJ did not allege any misappropriation of funds by Binance or any market manipulation.

Binance Will Sever all US Ties

The agreement will see Binance sever all ties in the US, with the company also agreeing to retain an independent compliance monitor for three years and, according to the DoJ, “remediate and enhance” its anti-money laundering and sanctions compliance programs. The CFTC sought Binance’s ejection from the US market when it filed its lawsuit in March, which it has achieved.

More Cases Pending

Binance’s, and Zhao’s, problems are far from over following the deal. The exchange still faces charges brought by the Securities and Exchange Commission (SEC) which has accused it of operating an illegal exchange, commingling customer assets, and redirecting billions of dollars of customer funds into an account controlled by CEO Changpeng Zhao. It, too, wanted to ban Binance, Binance.US, and Zhao from operating in the US, as well as levying a presumably hefty fine and disgorgement.

The DoJ also stated that the criminal investigation department of the IRS is “investigating the case,” which is being headed up by Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley. This could spell much further trouble for Binance and Zhao if it turns out that they have infracted its strict rules.

Binance Will Carry On… For Now

Binance doesn’t seem to be in any mood to capitulate, at least until other fines roll in, with Richard Teng, the company’s former Global Head of Regional Markets, named the new CEO. Zhao called Teng a “highly qualified leader… with over three decades of financial services and regulatory experience,” all of which he’ll need to settle the ship following Zhao’s departure and navigate Binance’s new direction

Fortunately, Teng seems to be in the position to give it a good shot; he was CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, Chief Regulatory Officer of the Singapore Exchange, and Director of Corporate Finance in the Monetary Authority of Singapore.