As an extremely surprising outcome, Binance CEO Changpeng Zhao CZ steps down as part of a substantial $4 billion settlement reached with various United States agencies. The U.S. Department of Justice has been conducting investigations into the cryptocurrency exchange for several years, focusing on anti-money laundering violations and sanctions violations.
Zhao acknowledged his mistakes in a post on X, the platform formerly known as Twitter, stating, “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.”
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is…
— CZ 🔶 BNB (@cz_binance) November 21, 2023
Why exactly CZ steps down as CEO and what are other results of the settlement?
As part of the settlement, Binance accepted responsibility for lacking appropriate compliance controls during its initial launch. The company acknowledged that it should have implemented controls suitable for its rapid growth.
While CZ steps down as CEO, he will remain the majority shareholder of Binance and act as a resource for consultation on historical aspects of the business. Forbes had previously reported on Zhao’s departure, and Binance executive Richard Teng is set to succeed him as CEO.
As part of the legal resolution, Zhao pleaded guilty to anti-money laundering and sanctions violations in federal court in Seattle. The settlement includes agreements with the Department of Justice, Commodities Futures Trading Commission (CFTC), and the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC).
Merrick Garland, the U.S. Attorney General, highlighted during a press conference that due to the committed crimes, Binance became the largest cryptocurrency exchange globally. The Treasury Department emphasized that it took “unprecedented action” to hold Binance accountable for violating U.S. anti-money laundering laws. Allegations include Binance’s failure to prevent and report suspicious transactions involving terrorist organizations like Al Qaeda and ISIS.
The settlement involves a $3.4 billion penalty to FinCEN, a $968 million penalty to OFAC, and compliance requirements along with monitoring for a five-year period.
Treasury Secretary Janet Yellen, in a press conference, criticized Binance for turning a blind eye to its legal obligations, allowing money to flow to terrorists, cybercriminals, and child abusers through its platform.
This development follows previous charges by the Securities and Exchange Commission (SEC) in June against Binance and Zhao. The SEC accused them of operating an unregistered exchange and misleading investors. The case is ongoing, and the SEC declined to comment on the recent settlement.
Since the founding of Coinbase back in 2012 we have taken a long-term view. I knew we needed to embrace compliance to become a generational company that stood the test of time. We got the licenses, hired the compliance and legal teams, and made it clear our brand was about trust…
— Brian Armstrong (@brian_armstrong) November 21, 2023
Brian Armstrong, CEO and co-founder of Binance’s U.S. competitor Coinbase, sees this as an opportunity for the industry to start a new chapter. In a post on X, Armstrong expressed hope that the action against Binance would serve as a catalyst for regulatory clarity, emphasizing the need for a fresh beginning in the cryptocurrency sector.
The way CZ steps down from his role as CEO as part of the $4 billion settlement signals a pivotal moment in cryptocurrency. This event highlights the critical importance of regulatory compliance in the rapidly evolving crypto landscape. Brian Armstrong’s optimism about a new chapter reflects a collective hope for increased transparency and responsible practices. As the industry adapts to these regulatory challenges, the impact of Binance’s landmark settlement will be closely monitored, with the expectation that it contributes to a more secure and resilient cryptocurrency ecosystem.
Meanwhile, if you are a real crypto enthusiast, make sure to check out our article on the future of cryptocurrency and a glimpse into digital finance.
Featured image credit: Binance
