Binance Chief Steps Down After Pleading Guilty, Released on Bail as Exchange Settles $4.3B
Global largest crypto exchange by transaction volume, Binance, confirmed the exit of its enigmatic chief executive Changpeng Zhao (CZ), in a move marking the climax of the multi-year investigation by US authorities.
Zhao revealed in a Tuesday, November 21 publication detailing his exit from the CEO role with Binance, replacing him with the ex-Global Executive of Regional Markets, Richard Teng. The leadership change effected by Binance portrays more than switching corporate roles.
Zhao indicated in a social media post that Richard Teng, who previously served as a senior Binance executive upon joining the exchange in 2021, is assuming the CEO reins. CZ tasked Teng with ensuring Binance realizes its subsequent phase of security, transparency, and compliance without compromising on its growth.
The US Department of Justice (DoJ) had, in a Tuesday November 21 briefing, disclosed that Binance and Zhao pleaded guilty to charges leveled against them. In particular, DoJ revealed that the defendants admitted to facilitating money laundering, violating sanctions, and executing unlicensed money transmission.
Binance Settling $4.3 Billion for Noncompliance Offenses in Formative Years
Subsequent reports issued following the DoJ Tuesday announcement estimate the total settlement would exceed $4 billion. Several reports indicate Binance agreed to part with $4.3 billion, a sum split among US regulators, including the Office of Foreign Assets Control (OFAC), Commodity Futures Trading Commission (CFTC), and Financial Crimes Enforcement Network (FinCEN).
The US agencies – CFTC, FinCEN, and OFAC are set to split the settlement estimated northward of $4 billion. Various publications identify the agencies as parties to the lawsuit leveled against Binance. In particular, the agencies already have in the past indicated that Binance contravened financial laws under their purview.
The CFTC submitted that Binance ran the exchange without fulfillment of necessary licenses. The OFAC and FinCEN Binance implemented weak and loose measures in its anti-money laundering (AML) and know-your-customer checks (KYC). The loose measures facilitated Binance in becoming the hub to execute terrorist financing and a conduit for moving illicit funding to the bad actors.
The agencies noted that Binance committed the offenses during its formative years in the 2017-19 period when terrorist groups, including Hamas, would fund operations via accounts opened on the Binance platform.
Zhao Pleads Guilty, Relinquishes Executive Role Despite Release on Bail
DoJ, in its presser alongside the US authorities, indicated that crypto exchange Binance, alongside the chief executive, admitted to orchestrating the alleged wrongdoing. With the exit of CZ from Binance, the focus turns to how the business will navigate the challenging post-Zhao era of learning, compliance, safety, and growth.
Binance’s official statement conveyed on Tuesday, November 21, admitted to implementing loose compliance policies in its infancy period. Nonetheless, the exchange reassured the users of its subsequent resolution to heighten compliance aided by significant recruitment and implementing industry-leading measures.
Binance clarified that the allegations did not include misappropriation of clients’ funds and orchestrating market manipulation. Instead, the charges involved compliance-related issues that will constitute a ground for the Binance learning curve in the future.
The US authorities formerly apprehended the immediate Binance chief executive Zhao as per the plea deal before his release on $175 million bail. The release enables Zhao to have relative freedom till his February 23, 2024, reappearance in the US court for sentencing. As such, CZ is allowed to return to the UAE and would return to the US a fortnight prior to the sentencing.
Zhao originally stared at a ten-year sentence, though reduced to 1.5 years in the plea agreement. While he would retain a majority stake at Binance, he would relinquish assuming an executive role at any crypto-affiliated enterprise for at least three years. Besides, Zhao is to settle a $50 million fine, though the judge may impose additional fines and drop the jail time sentence.
BNB Plunge Amid Cloud of Uncertainty
The Binance-US government plea agreement permits the crypto exchange to continue operating. Nonetheless, the government regulators would closely monitor Binance operations.
The plea agreement prompted uncertainty on whether Binance’s native token, BNB, would still play a crucial role in the post-Zhao era. The community weighed on the matter, prompting price movement in BNB that plunged 9% following the news of the Binance settlement.
BNB surrendered the day’s high of $269.92 to test a low of $224.98 post the news before regaining to exchange hands 9% down at $235.29 at press time 08:40 am UTC as per CoinMarketCap.
The market capitalization has declined by 9.26% to $35.679 billion to rank the fourth largest crypto asset, as per CoinMarketCap. BNB has attracted a wild uptick in daily trading volume by 59.46% to average $2.575 billion in the past 24 hours.
Editorial credit: Emre Akkoyun / Shutterstock.com
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