Binance Admits to Violating U.S. Laws: Pays $4.3 Billion in Fines in Historic Settlement
Summary:
Binance and its founder, Changpeng "CZ" Zhao, have confessed to infringing U.S. anti-money laundering and terrorism financing laws, agreeing to pay $4.3 billion in penalties. The saga began in 2018 with several U.S. investigations into Binance, escalating to multiple charges from the CFTC and SEC in 2021 for trading irregularities, market manipulation, and violation of sanctions against Russia. After a series of senior executive departures and workforce cuts, Binance faced indictments and ended with CZ stepping back from Binance, with total penalties exceeding $4 billion.
Cryptocurrency behemoth, Binance, along with its founder Changpeng "CZ" Zhao, have confessed to transgressing U.S. laws related to money laundering and funding of terrorism. They have agreed to settle the matter with a substantial payment of $4.3 billion in penalties. Here's the chronological narrative of the events.
Reports highlighting investigations surrounding Binance first cropped up on 15th February, indicating that U.S. law enforcement had been probing the cryptocurrency entity since 2018. On March 1, Binance's operations drew the attention of U.S. Congress with Senators Elizabeth Warren, Chris Van Hollen and Roger Marshall penning a letter to CZ and Binance.US CEO, Brian Shroder, seeking clarity on numerous accusations and detailed company financial accounts. Dissatisfied with the answers, the executives were subsequently indicted for deceit.
Following this, on March 27 the Commodity Futures Trading Commission (CFTC) filed a lawsuit against CZ, the company's chief compliance officer Samuel Lim, and Binance. They were alleged of seven instances of trading discrepancies and market manipulation which CZ fervently rejected. The investigation by CFTC reportedly started in 2021.
A Bloomberg report on May 5 indicated that the Justice Department was snooping into possible violations by Binance of sanctions placed on Russia. An investigation was initiated to ascertain if Binance was illegally used as a platform to bypass U.S sanctions by Russians.
The next musical chair of allegations was played on June 5 by the Securities and Exchange Commission (SEC) who filed a lawsuit against Binance, Binance.US and CZ, charging them with 13 violations including sales of unregistered securities, unauthorized usage of Binance exchange by U.S. customers, wash sales and misuse of customer and company funds. Subsequently, Binance.US had to curtail its U.S. operations following an emergency restraining order by SEC.
On July 6, a leadership evacuation wave began as four senior members of the Binance.US team exited the firm. This was followed by a potential contemplation of fraud charges against Binance by the Justice Department on August 2. To curb a potential panic amongst users, the department was more inclined towards fines and non-prosecution agreements.
Binance.US, on August 14, implored for a protective order against the SEC claiming that the latter was on a “fishing expedition” during the discovery process. On Sept 13-14, Binance.US reduced its workforce by a third, around 100 employees while its CEO Brian Shroder also bade the company goodbye.
On September 19, Binance.US had a minor win in court when the judge declined the SEC’s access to the exchange’s software. On Sept 21, CZ along with Binance and Binance.US asked the court to dismiss the case against them by SEC. The SEC responded by stating their claim as a “tortured interpretation of the law”. Another motion to dismiss a lawsuit was filed by Binance, this time against CFTC on October 23.
In a surprising turn of events on October 26, CZ’s wealth took a hit, reducing his position from 11th to 95th in the Bloomberg Billionaires Index, bringing down his personal wealth from $96.9 billion to $17.3 billion. Yet he saw a rise again in November and climbed to 68th on the list.
That very day Senator Cynthia Lummis and Representative French Hill urged the Justice Department to take action against Binance and Tether, accusing them of enabling evasion of sanctions. This claim submitted two weeks post Binance freezing accounts associated with Hamas.
Then on the 21st of November, Binance and CZ were indicted by the government in Washington state. The documents were available to the public on November 21. As part of the settlement, CZ stepped back from his role in Binance.
The penalties imposed were hefty, more than $4 billion, including fines personally incurred by CZ and Lim.
Published At
11/21/2023 11:12:15 PM
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