Binance, the world’s largest crypto exchange, has admitted guilt in violating anti-money laundering and US sanctions regulations, striking a settlement deal in the US to the tune of $4.3 billion, marking one of the largest corporate penalties in American history. In this agreement, CEO Changpeng Zhao will be levied a $50 million fine and is mandated to step down from his position.

The charges levelled against Binance encompass anti-money laundering offences, operating an unlicensed money-transmitting business, and breaching US sanctions. Shockingly, the exchange acknowledged facilitating transactions involving terrorist groups like Hamas. Specifically, it allowed transactions exceeding $898 million between customers in the US and Iran.

The repercussions are severe, with Binance facing a criminal fine of $1.8 billion and forfeiting an additional $2.5 billion. Changpeng Zhao, commonly known as CZ, potentially faces up to 10 years in prison, though a plea deal might limit his sentence to a maximum of 18 months. The exact term is yet to be determined by the Department of Justice.

The violations include the failure to prevent and report suspicious transactions involving terrorist entities such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and the Islamic State of Iraq and Syria. The timing of this revelation coincides with the ongoing conflict between Israel and Hamas, adding a geopolitical layer to the situation.

Binance's swift ascent to becoming the world’s largest cryptocurrency exchange is now being defined in the context of the significant penalties it faces. Attorney General Merrick Garland emphasized the exchange’s colossal penalty, stating, “Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now it’s paying one of the largest corporate penalties in U.S. history.”

The allocated funds from the fine will be distributed among various government agencies, with $3.4 billion going to the Treasury Department’s Financial Crimes Enforcement Network and $968 million to the Office of Foreign Assets Control, specifically addressing the Bank Secrecy Act and sanctions violations.

As part of the settlement, CZ stepped down as Binance CEO and was prohibited from managerial involvement with the company for three years. Richard Teng is set to succeed Zhao as CEO. Furthermore, Binance commits to fortifying its compliance program and will be subject to oversight by an independent monitor for the next three years.

While Binance attributes early compliance lapses to its rapid launch, the settlement does not implicate the exchange in allegations of misappropriating user funds or engaging in market manipulation. Zhao's sentencing, facing a potential maximum of 10 years, is postponed by six months, and his agreement includes a waiver of the right to appeal, provided the sentence does not exceed 18 months.

This resolution stands as one of the most substantial penalties within the cryptocurrency industry, which has been under increasing scrutiny from government agencies and lawmakers. Notably, Binance's market share has seen fluctuations, initially surging to over 60% globally and subsequently dipping to less than 44%, reflecting the changing dynamics within the industry.

While this settlement resolves the CFTC case, Binance is still entangled in an ongoing lawsuit with the Securities and Exchange Commission (SEC), which, along with the Justice Department, continues to intensify scrutiny on the cryptocurrency sector.

Image source: The Block