top of page

Binance Founder Gets Prison Term as Crypto Exchange Pays $4.3 Billion to Resolve U.S. Investigations

Changpeng Zhao, the billionaire founder of Binance, was sentenced to four months in prison by a federal judge in Seattle on Tuesday, capping a multi-year investigation by American authorities into the world's largest cryptocurrency exchange over violations of anti-money laundering laws.

Binance Founder Gets Prison Term as Crypto Exchange Pays $4.3 Billion to Resolve U.S. Investigations

Mr. Zhao, 47 years old, had pleaded guilty in November to conspiring to violate U.S. anti-money laundering requirements. As part of his plea deal, he agreed to resign as chief executive of Binance, the crypto trading platform he launched in 2017 that grew explosively by serving a global user base.

The four-month sentence was far less than the three years prosecutors had sought. But U.S. District Judge Richard A. Jones said Mr. Zhao had an "obligation to comply with all U.S. regulations" and "failed at that opportunity."

The criminal case against Binance's founder coincided with a parallel raft of civil enforcement actions that will inflict over $4 billion in penalties on the cryptocurrency exchange and subject its operations to stringent outside monitoring.

Binance Founder Gets Prison Term as Crypto Exchange Pays $4.3 Billion to Resolve U.S. Investigations

Binance entered into a plea agreement with the Justice Department, admitting to criminal violations of bank secrecy laws. It will pay a $260 million fine and retain an independent monitor selected by the Justice Department for the next three years to oversee its anti-money laundering practices.

Separately, Binance reached a $957 million settlement with the Treasury Department to resolve violations of U.S. sanctions rules. The crypto exchange will retain a different monitor for five years chosen by the Financial Crimes Enforcement Network, a Treasury unit.

Binance Founder Gets Prison Term as Crypto Exchange Pays $4.3 Billion to Resolve U.S. Investigations

Binance also settled charges by the Commodity Futures Trading Commission that it engaged in illegal off-exchange trading and failed to register properly with the derivatives regulator, resulting in a $1.7 billion civil penalty. Finally, the exchange agreed to wind down its services for U.S. customers and pay $365 million to the Securities and Exchange Commission as part of a settlement, without admitting or denying the SEC's allegations that it had violated investor protection rules.

The constellation of penalties and oversight measures represent the most comprehensive crackdown to date by American authorities on the largely unregulated crypto industry.

The criminal and civil resolutions put a partial bookend on years of open investigations targeting Binance for allowing money laundering, sanctions violations and illegal trades involving Americans. The company long maintained it didn't have headquarters anywhere and that it blocked U.S. users, complicated efforts by regulators to pursue it.

But in Tuesday's sentencing hearing, prosecutors said Binance knowingly allowed millions of U.S. customers to illegally access its services and failed to put in place basic anti-money laundering controls that permitted hackers, drug traffickers and sanctions evaders to funnel illicit funds through the platform.

"Binance and Mr. Zhao took active steps to shirk U.S. regulatory responsibilities," said Assistant U.S. Attorney Sihien Tsai.

Mr. Zhao's lawyers portrayed the violations as unintentional oversights, saying he simply grew his company too fast without properly institutionalizing compliance systems to screen out illicit activity.

"It was a tech start-up, and he moved too quickly and failed to implement money laundering controls in a timely manner," said Jessica Nall, a lawyer for Mr. Zhao. "That is what happened here."

The crackdown on Binance represents a watershed moment for the cryptocurrency industry, which has long operated in a regulatory gray area. The stringent penalties, monitorship requirements, and Mr. Zhao's criminal conviction underscore the commitment by U.S. authorities to rigorously enforce anti-money laundering, investor protection, and sanctions laws in the digital asset sector. As Binance undertakes a compliance overhaul under the watchful eye of federal monitors, the reverberations are likely to be felt across crypto trading platforms that have prioritized rapid growth over robust controls against financial crimes. The saga may prompt the industry to preemptively bolster risk management or catalyze Congress to establish a clear regulatory regime for digital assets. Either way, Binance's $4.3 billion reckoning signals that the free-wheeling era of crypto is giving way to enhanced scrutiny and accountability.

3 views0 comments


bottom of page