Binance capitulates to the US Department of Justice, but CEO Zhao gets off lightly

Binance, believed to be the largest crypto exchange in the world, settles with the US Department of Justice to pay a $4.3 billion fine. Her boss, Changpeng Zhao, resigns and pays a $50 million fine.

Changpeng Zhao (CZ), founder and CEO of Binance, said to be the world’s largest crypto exchange, is resigning. He also pleaded guilty to violating US anti-money laundering regulations.

Zhao appeared in court in Seattle on Tuesday. Binance has been accused of enabling the violation of financial sanctions. The exchange served terrorist organizations such as Hamas, Al-Quida and ISIS, facilitated transactions to North Korea and Iran, and exchanged money for money launderers, hackers and other criminals.

Binance or Zhao and the US Department of Justice reached an agreement with the court date. One could call what was agreed upon a capitulation of the stock market.

Binance pleads fully guilty and agrees to a $4.3 billion fine. Of this, 3.4 billion will go to FinCEN and 968 million to OFAC. The exchange will also admit an observer who will check compliance with anti-money laundering requirements and report to US authorities. Furthermore, Binance will completely withdraw from the US market and effectively block US citizens.

Zhao himself comes out of the affair relatively unscathed. He pays a fine of $50 million and is allowed to retain his majority ownership of Binance, but is no longer allowed to hold any position. He also faces a maximum prison sentence of 18 months.

There was a similar verdict in the lawsuit against the BitMEX exchange: its managing director Arthur Hayes pleaded guilty, resigned and received two years probation. This is a pretty rosy outlook for Zhao, who is said to have a fortune in the region of $100 billion.

CZ confirmed his resignation on Twitter. It’s not easy emotionally, but it’s the right decision. He made mistakes and must take responsibility.

This burden initially consists of him taking a break. “I’m going to take a break first. I haven’t really had a day off in the last six and a half years.” He couldn’t imagine founding a new startup. “I’m happy to be a (happy) one-hit wonder.” Instead, he will probably invest passively in Web3, AI and biotech.

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 🔶 Binance (@cz_binance) November 21, 2023

So while CZ “takes responsibility for his mistakes,” someone else will have the honor of dealing with the problems. Zhao introduces the new CEO of Binance: Richard Teng, currently “Global Head of Regional Markets”. Before Binance, Teng worked as Chief Regulatory Officer of the Singapore Stock Exchange and CEO of the Abu Dhabi Financial Supervisory Authority, so he is very familiar with regulation.

Teng’s new role is also a signal that Binance wants to play by the rules. He promises to “use everything I have learned over the last three decades in financial economics and regulation to lead our remarkable, innovative and dedicated team.” One of his priorities will be to collaborate with regulators worldwide.

It is an honour and with the deepest humility that I step into the role of Binance’s new CEO.

We operate the world’s largest cryptocurrency exchange by volume. The trust placed on us by our 150m users and thousands of employees is a responsibility that I take seriously and hold…

— Richard Teng (@_RichardTeng) November 21, 2023

With the deal with the Ministry of Justice, Teng’s legal trouble is not yet over. While the CFTC’s lawsuit against Binance has also been settled with the settlement, another procedure is running in parallel: the US Securities and Exchange Commission (SEC) is suing for a violation of securities laws.

After FinCEN and OFAC took their billions from Binance, the SEC, under its ambitious director Gary Gensler, is unlikely to accept anything less. Ironically, Teng is someone who had a very similar career path between the regulatory and financial sectors, but settled on the other side.