Binance to Pay Record $4.3Bn Penalty to Settle with US SEC, CEO to Step Down

The CEO of Binance, the world's largest cryptocurrency exchange, has stepped down after the company pleaded guilty Tuesday to violations of the Bank Secrecy Act, an anti-money laundering law, among other charges.

The company will pay more than $4.3 billion to settle the charges, the largest penalty in the history of the Treasury Department. Zhao also agreed to a $50 million fine as part of the settlement.

The Justice Department said in a news release that Changpeng Zhao also pleaded guilty to failing to maintain an effective anti-money laundering program and would step down as chief executive.

Zhao confirmed his departure from the chief executive role in a post on X, in which he acknowledged that he made mistakes. He also said Richard Teng, Binance's head of regional markets, would take over as CEO.

Zhao said he would remain a shareholder of the company and be able to consult with its leadership. He also stressed that there were no allegations related to the misuse of customer funds or market manipulation.

As part of the terms of the settlement, Binance has agreed to a third-party monitor, overseen by Treasury's Financial Crimes Enforcement Network, to ensure the company is compliant with federal regulations. The monitor will have access to Binance's systems, transactions and accounts, the Treasury release said.

According to the latest news, Zhao has been released from custody on a $175 million personal recognizance bond.

According to a court filing, he's posting $15 million held in a trust account by Davis Wright Tremaine (separate from the bond) and agreeing to forfeit funds if he violates the terms of his release. He's also finding two guarantors, who are pledging $250,000 and $100,000 respectively. A sentencing hearing has been scheduled for Feb. 23, 2024, at 9 a.m. Pacific Time.

Financial exchanges in the U.S., including those that specialize in cryptocurrency, are required to follow strict "know your customer" laws to identify their users. In a statement Tuesday, the Treasury Department said that Binance "willfully failed to report" more than 100,000 suspicious transactions from a host of sanctioned groups, including terrorist groups, a litany of criminal ransomware hackers and users in countries facing U.S. sanctions, including North Korea and Iran. 

According to the Justice Department's release, Binance's compliance employees internally noted that the company didn't even have protocols to flag transactions that were money laundering risks.

The guilty pleas come less than a month after Zhao's biggest crypto rival, Sam Bankman-Fried, was found guilty of fraud. The two had at one time arguably been the faces of crypto and almost merged operations late last year when Bankman-Fried's FTX was on the verge of collapse.

Bankman-Fried later blamed Zhao for what he claimed was a targeted attack that led to FTX's downfall.

The announcement also comes on the heels of another major federal enforcement action against a cryptocurrency exchange. On Monday, the SEC charged U.S.-based Kraken​ with illegally failing to register its services with the agency, as required by securities law.