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Binance chief executive Changpeng Zhao has pleaded guilty to violating a US banking secrecy law, as federal prosecutors unveiled sweeping accusations against the world’s largest cryptocurrency exchange.
Zhao, one of the crypto industry’s most outspoken and influential leaders, entered the plea in a federal court in Seattle on Tuesday and agreed to pay a $50mn fine.
Binance has also pleaded guilty to charges including conspiring to knowingly conduct an unlicensed money transmitting business and knowingly and wilfully causing the exportation of services to Iran, the Department of Justice said.
Prosecutors alleged the exchange failed to establish an anti-money laundering programme and “wilfully caused violations of US economic sanctions”.
The charges alleged Binance failed to register with the US Treasury as a “money transmitting business . . . in part to prevent” regulators from discovering it facilitated billions of dollars in crypto transactions without implementing appropriate “know your customer” measures.
Binance facilitated transfers between the US and sanctioned jurisdictions including Cuba, Syria and Iran, the court document said.
The alleged misconduct occurred between at least August 2017 and October 2022, according to court filings.
The charges dramatically expand US authorities’ crackdown on the crypto industry. The DoJ in 2021 set up a new unit focused on criminal misuse of digital assets, as the Joe Biden administration has emerged as one of the jurisdictions with the toughest stance on crypto worldwide.
Binance did not respond to multiple requests for comment.
Mark Kornfeld of law firm Buchanan Ingersoll and Rooney said: “DoJ action against the main crypto player is a very significant development for this industry as a whole. This is proof that this is the new normal, not just a random development for the industry, everyone is on pretty significant notice that this is the way it’s going to be.”
The Commodity Futures Trading Commission in March accused Binance and Zhao of operating illegally in the US. The civil complaint alleged that much of the group’s reported trading volume and profitability have come from “extensive solicitation of and access to” US customers, contradicting the exchange’s claims.
The plea agreements announced on Tuesday will also resolve the CFTC case, authorities said.
In June, the US Securities and Exchange Commission filed 13 civil charges accusing Binance of violations including mixing billions of dollars of customer cash with a separate trading firm owned by its chief executive and operating unregistered exchanges, broker-dealers and clearing agencies.
Under Zhao’s stewardship, the group grew from a modest start-up in the summer of 2017 into a giant with employees in dozen of countries. By November 2022 — days after the collapse of once-fierce rival FTX — Binance controlled more than half of the crypto market.
But under the weight of increasing regulatory scrutiny in 2023, the crypto giant’s grip on power has dwindled and now handles roughly a third of the market.