Binance's Chief Executive Officer Changpeng Zhao agreed to step down and pleaded guilty to breaching anti-money laundering laws in the US, according to the people familiar with the matter who shared information with the Wall Street Journal.
This step followed a settlement worth $4.3 billion between Zhao and the US Department of Justice (DOJ). The Justice Department has been conducting investigations into Binance's operations. The allegations include permitting individuals from sanctioned countries to perform transactions on the platform and other regulatory concerns, according to the WSJ.
Regulatory Scrutiny and Legal Challenges
Last year, the US federal prosecutors targeted Binance, seeking extensive records involving Zhao, according to a report by CNBC. The request formed part of the DOJ's probe into potential non-compliance with US financial crime laws.
The inquiry centered on whether Binance breached the Bank Secrecy Act that requires crypto exchanges conducting substantial business in the US to comply with anti-money laundering regulations or face severe penalties, including lengthy jail terms.
The detailed written request demanded internal communications, including those of Zhao and other top executives. It involved allegations about illegal transactions, recruitment of US customers, and directives related to purported tampering with or transferring documents from Binance's files.
Binance entered the US market in 2019 after registering its local arm, FinCEN. However, over the years, the exchange has faced mounting regulatory pressure in the country. In 2022, some US senators urged the DOJ to investigate potential misrepresentations made by the company.
Complex Web of Allegations
Additionally, the Securities and Exchange Commission (SEC) escalated its confrontation with Binance this year, bringing 13 charges against the crypto exchange, two affiliated entities, and Zhao. These allegations revolved around operating illegal trading platforms and offering unregistered crypto assets.
The SEC accused Binance Holdings of running unregistered exchanges, including Binance.com and Binance.US, contrary to its claims of restricting US clients. Additionally, affiliated entities BAM Trading, BAM Management, and Binance allegedly offered unregistered tokens like BNB, BUSD, and profit programs to US investors.
The SEC's complaint extends to Zhao's alleged control of the US affiliate, contradicting public statements about its independence. Furthermore, the allegations pointed to co-mingling customer assets, diverting funds to associated entities controlled by Zhao, and engaging in manipulative trading practices.
The SEC's Chair, Gary Gensler, emphasized the extensive nature of the alleged misconduct, citing deception, conflicts of interest, lack of disclosure, and intentional evasion of laws. The charges implied that billions of dollars of US investor capital were put at risk due to Binance's actions.
