This guilty plea from Binance is part of a coordinated resolution with the Department of the Treasury's Financial Crimes Enforcement Network and Office of Foreign Assets Control, as well as the U.S. Commodity Futures Trading Commission. Attorney General Merrick B. Garland stated that Binance's success as the largest cryptocurrency exchange was partly due to the illegal activities it engaged in and that the corporation is now facing one of the biggest corporate penalties in U.S. history.
Binance Holdings Limited, the operator of the biggest cryptocurrency exchange known as Binance.com, has admitted guilt and agreed to pay more than $4 billion to address the Department of Justice's investigation into breaches related to the Bank Secrecy Act, failure to register as a money transferring business, and the International Emergency Economic Powers Act.
Changpeng Zhao, the founder and CEO of Binance and a Canadian citizen, has also pleaded guilty for not maintaining an effective program to prevent money laundering, violating the Bank Secrecy Act, and has stepped down from his position as CEO.
This guilty plea from Binance is part of a coordinated resolution with the Department of the Treasury's Financial Crimes Enforcement Network and Office of Foreign Assets Control, as well as the U.S. Commodity Futures Trading Commission.
Attorney General Merrick B. Garland stated that Binance's success as the largest cryptocurrency exchange was partly due to the illegal activities it engaged in and that the corporation is now facing one of the biggest corporate penalties in U.S. history. The recent prosecution of the CEOs of two major cryptocurrency exchanges in separate criminal cases emphasizes the message that utilizing new technology to break the law does not make one a disruptor, but instead a criminal.
“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,” said Secretary of the Treasury Janet L. Yellen. “Today’s historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences.”
“A corporate strategy that puts profits over compliance isn’t a path to riches; it’s a path to federal prosecution,” said Deputy Attorney General Lisa O. Monaco. “Today’s charges and guilty pleas – combined with a more than $4 billion financial penalty – sends an unmistakable message to crypto and defi companies: if you serve U.S. customers, you must obey U.S. law.”
“Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law,” said Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division. “Binance’s and Zhao’s willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States.”
“Binance’s crimes gave sanctioned customers unfettered access to American capital and financial services,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division (NSD). “This prosecution is a warning that companies that do not build sanctions compliance into their services face serious criminal penalties, as do the executives who lead them.”
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees.”
“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers,” said Chairman Rostin Behnam of the Commodity Futures Trading Commission (CFTC). “American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios.
It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.”
“When you put growth above compliance, you end up in hot water,” said Chief Jim Lee of the IRS Criminal Investigation (IRS-CI). “Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated U.S. sanctions tied to the International Emergency Economic Powers Act.
When you do so, your business becomes a playground for bad actors. Hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams moved through Binance in an attempt to evade detection by law enforcement.”
Court documents reveal that Binance, the largest cryptocurrency exchange globally, admitted to prioritizing growth and profits over adhering to U.S. law. Despite the need to register as a money services business and implement an effective anti-money laundering (AML) program, Binance chose not to comply. Additionally, Binance failed to incorporate controls to prevent money laundering or transactions with customers in sanctioned jurisdictions.
In 2019, Binance claimed it would block U.S. customers and launched a separate U.S. exchange, but it still sought to retain valuable VIP customers who aided in facilitating trades. Binance also neglected to establish fundamental components of an effective AML program, such as comprehensive know-your-customer (KYC) protocols or transaction monitoring, and never reported suspicious activity to FinCEN.
While Binance eventually required users to provide KYC information, it allowed non-compliant users to continue trading until May 2022. From August 2017 to October 2022, U.S. customers, including VIPs, conducted trillions of dollars in transactions on the platform, generating over $1.6 billion in profit for Binance.
The Department reached a resolution with Binance after considering several factors. These factors include the severity and extent of the offense committed by Binance, as they processed billions of dollars of cryptocurrency transactions for US individuals and facilitated transactions that violated US sanctions.
Although Binance did not promptly disclose their wrongdoing, they received some credit for cooperating with the Department's investigation and making efforts to improve their compliance program. However, Binance did not receive full credit for their cooperation due to their delayed submission of relevant evidence, including recorded meetings regarding US legal requirements. Consequently, the imposed criminal penalty reflects a 20% reduction from the minimum fine recommended by the applicable US sentencing guidelines.
Furthermore, according to court documents, Binance's founder, owner, and CEO Zhao admitted to being aware that Binance served US users and was obliged to register with FinCEN (Financial Crimes Enforcement Network) and implement an effective Anti-Money Laundering (AML) program. Zhao was fully aware of the importance of US users for Binance's growth and revenue.
However, he prioritized Binance's expansion over complying with US law and even instructed employees to seek forgiveness rather than permission. Binance's lack of a robust AML program resulted in illegal transactions between US users and users in countries subject to US sanctions. Zhao's decisions clearly favored Binance's profit and growth at the expense of adhering to the Bank Secrecy Act (BSA) requirements.
The Internal Revenue Service-Criminal Investigation (IRS-CI) is currently conducting an investigation into this case. Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley, Trial Attorney Elizabeth Carr from the Criminal Division's Money Laundering and Asset Recovery Section (MLARS), Trial Attorneys Beau Barnes and Alex Wharton from the Counterintelligence and Export Control Section (CES) of the National Security Division (NSD), and Assistant US Attorney (AUSA) Mike Dion from the Western District of Washington are prosecuting the case.
Additionally, Trial Attorney Julia Jarrett from MLARS (currently an AUSA for the District of Oregon) and Trial Attorney Matthew Anzaldi from CES (currently with NSD's National Security Cyber Section) made significant contributions to the investigation and prosecution.
MLARS's Bank Integrity Unit investigates and prosecutes financial institutions, including their officers, managers, and employees, whose actions pose a threat to the institution or the broader financial system's integrity. The Criminal Division has allocated substantial resources to the Bank Integrity Unit, resulting in over $12 billion in penalties imposed on financial institutions for sanctions violations in the past decade.
NSD's Counterintelligence and Export Control Section handles investigations and prosecutions related to export control, sanctions violations, and other national security crimes. NSD is dedicated to expanding its corporate enforcement efforts, including increasing the number of prosecutors focused on this work and establishing key positions such as Chief Counsel and Deputy Chief Counsel for Corporate Enforcement.
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