Changpeng Zhao speaking in Lisbon in 2022
Changpeng Zhao speaking in Lisbon in 2022. Image: Ben McShane/Web Summit via Sportsfile/Wikimedia Commons (CC BY 2.0)

Binance agrees to pay $4.3 billion for money laundering violations, CEO steps down

Binance, the largest cryptocurrency exchange in the world, agreed to pay more than $4 billion in settlements with several U.S. law enforcement agencies after years of investigations uncovered widespread criminal use of the platform.

In addition to the settlement, Binance CEO Changpeng Zhao pled guilty to several charges in federal court in Seattle on Tuesday. On social media, Zhao said he was stepping down as CEO, and during a press conference U.S. Justice Department officials said his removal was part of their agreement with the company.

Attorney General Merrick Garland and Secretary of the Treasury Janet Yellen told reporters Binance knew and actively sought out business from sanctioned countries, terrorist groups and online marketplaces used by cybercriminals.

“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” Yellen said.

The Treasury Department said the platform was used by groups like Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and the Islamic State of Iraq and Syria (ISIS) — as well as ransomware attackers, money launderers, and other criminals.

It facilitated trades between U.S. users and people in sanctioned countries like Iran, North Korea, Syria, and the occupied Crimea region of Ukraine.

“Between August 2017 and April 2022, there were direct transfers of approximately $106 million in bitcoin to wallets from Hydra… a popular Russian darknet marketplace, frequently utilized by criminals, that facilitated the sale of illegal goods and services,” Garland said, noting that the platform only stopped processing the transfers after Hydra was shut down by German and U.S. authorities last April.

“From February 2018 to May 2019, Binance processed more than $275 million in deposits and $273 million in withdrawals from Bestmixer,” a large cryptocurrency anonymizing service that was shut down on money laundering charges.

Binance will now pay one of the largest corporate penalties in U.S. history, according to Garland, after pleading guilty to several violations of U.S. financial law — most notably for failing to prevent money laundering and for failing to prevent U.S. customers from conducting transactions with customers in sanctioned jurisdictions.

Garland and Deputy Attorney General Lisa Monaco said internal documents obtained from the company showed that Zhao and several other senior leaders knew of their violations and actively sought to hide them from regulators.

In one quote shared by Garland from a September 2019 chat, Zhao said: “If we blocked US users from day 1, Binance will be not [sic] as big as we are today. We would also not have had any US revenue we had for the last 2 years.” He then added: “better to ask for forgiveness than permission.”

Binance’s largest share of customers came from the U.S., and the company long fought efforts to wall them off before buckling. But even after creating a separate U.S. entity, Garland said the company found ways to allow U.S.-based customers to use the international platform, exposing them to transactions with sanctioned entities.

As part of the plea agreement, Binance has agreed to forfeit $2.5 billion and to pay a criminal fine of $1.8 billion for a total financial penalty of $4.3 billion.

The cryptoplatform has also agreed to retain an independent compliance monitor for three years as well as make significant changes to their anti-money laundering and sanctions compliance programs.

The Treasury Department’s Office of Foreign Assets Control (OFAC) imposed a five-year monitorship, and requires significant compliance undertakings, including to ensure Binance’s complete exit from the United States.

They added that Treasury will “retain access to books, records, and systems of Binance for a period of five years through a monitor.” and said failure to live up to these obligations could expose Binance to substantial additional penalties, including a $150 million suspended penalty if they fail to comply.

The Treasury Department said Binance “willfully failed to report well over 100,000 suspicious transactions that it processed as a result of its deficient controls” — including transactions from ransomware.

“Despite being one of the largest receivers of ransomware proceeds, and transacting in millions of dollars of ransomware proceeds from attacks involving at least 24 different strains of ransomware, Binance failed to report these transactions,” the Treasury Department said.

“Despite sending and receiving virtual assets proceeds from large-scale hacks, account takeovers, and darknet markets dealing in illegal narcotics, counterfeit and fraud-related goods and services, as well as other illegal contraband, Binance never reported any such transactions.”

Zhao, who lives in the United Arab Emirates, will personally have to pay a $50 million fine and is also facing an 18-month sentence for his charges.

Former Binance chief compliance officer Samuel Lim will pay a fine of $1.5 million.

In a message, Zhao admitted that he “made mistakes” and “must take responsibility.”

“I can’t see myself being a CEO driving a startup again. I am content being an one-shot (lucky) entrepreneur. Should there be listeners, I may be open to being a coach/mentor to a small number of upcoming entrepreneurs, privately,” he said.

“If for nothing else, I can at least tell them what not to do. On that note, I am proud to point out that in our resolutions with the U.S. agencies they: - do not allege that Binance misappropriated any user funds, and - do not allege that Binance engaged in any market manipulation.”

Get more insights with the
Recorded Future
Intelligence Cloud.
Learn more.
No previous article
No new articles
Jonathan Greig

Jonathan Greig

is a Breaking News Reporter at Recorded Future News. Jonathan has worked across the globe as a journalist since 2014. Before moving back to New York City, he worked for news outlets in South Africa, Jordan and Cambodia. He previously covered cybersecurity at ZDNet and TechRepublic.