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

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

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

Attorney General Merrick Garland and Treasury Secretary Janet Yellen said Binance journalists were aware of and actively sought business from sanctioned countries, terrorist groups, and online marketplaces used by cybercriminals.

“Binance has turned a blind eye to its legal obligations in the pursuit of profit. His deliberate failures allowed money to flow to terrorists, cybercriminals and pedophiles through his platform,” Yellen said.

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

It has facilitated trade 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 Binance.com wallets from Hydra… a popular Russian darknet marketplace, frequently used by criminals, which facilitated the sale of illegal goods and services,” Garland said. , emphasizing that the platform only stopped processing transfers after Hydra was shut down by German and American 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 anonymization service that was shut down for money laundering.

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

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

In a quote shared by Garland during a September 2019 conversation, Zhao said, “If we blocked US users from day one, Binance wouldn’t be (sic) as big as we are today.” We also wouldn’t have had any revenue in the US for the last two years. He then added: “it’s better to ask for forgiveness than for permission.”

The largest share of Binance’s customers came from the United States, and the company struggled for a long time to isolate them before giving in. 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 agreed to forfeit $2.5 billion and pay a criminal fine of $1.8 billion for a total financial penalty of $4.3 billion.

The crypto platform also agreed to retain the services of an independent compliance monitor for three years and make significant changes to its anti-money laundering and sanctions compliance programs.

Treasury Department’s Office of Foreign Assets Control (OFAC) imposed monitoring for five years and requires significant compliance commitments, including to ensure Binance’s complete exit from the United States.

They added that Treasury will “retain access to Binance’s books, records and systems for a period of five years via a monitor.” and stated that failure to comply with these obligations could subject Binance to substantial additional penalties, including a suspended penalty of $150 million for non-compliance.

The Treasury Department said Binance “willfully failed to report more than 100,000 suspicious transactions it processed due to its deficient controls” – including transactions originating from ransomware.

“Despite being one of the largest recipients of ransomware proceeds and having conducted multi-million dollar transactions from attacks involving at least 24 different ransomware strains, Binance has not reported these transactions,” the Treasury Department said.

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

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

Former Binance Compliance Officer Samuel Lim to pay $1.5 million fine.

In a message, Zhao admitted that he “made mistakes” and “needs to take responsibility for them.”

“I don’t see myself going back to being CEO at the head of a startup. I’m content to be a one-time (lucky) entrepreneur. If there are listeners, I may be willing to become a coach/mentor to a small number of aspiring entrepreneurs, privately,” he said.

“If for nothing else, I can at least tell them what not to do. On this subject, I am proud to point out that in our resolutions with the US agencies: – do not allege that Binance misappropriated user funds, and – do not allege that Binance engaged in any manipulation of walk.

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Jonathan Greig is a breaking news reporter at Recorded Future News. Jonathan has worked as a journalist around the world since 2014. Before returning to New York, he worked for media outlets in South Africa, Jordan and Cambodia. He previously covered cybersecurity at ZDNet and TechRepublic.

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