24/11/23

US: Binance CEO exits after pleading guilty to money laundering charges

As published on: fintechfutures.com, Friday 24 November, 2023.

Binance Holdings, the entity operating the world’s largest crypto exchange, Binance.com, has pleaded guilty to US federal charges relating to anti-money laundering (AML), unlicensed money transmitting, and sanctions violations, with founder and CEO Changpeng Zhao (CZ) also handing in his resignation.

Richard Teng will replace CZ as new Binance CEO

As part of the resolution with the US Department of Justice (DoJ), Binance has agreed to pay $4.3 billion in fines and forfeitures in what Attorney General Merrick B. Garland calls “one of the largest corporate penalties in US history”.

The DoJ adds: “Binance has also agreed to retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs.”

As of 21 November, CZ has pleaded guilty to failing to maintain an effective anti-money laundering (AML) program and has resigned as CEO of Binance.

Taking to X, CZ writes: “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.”

He also notes that in the resolution, the US agencies “do not allege that Binance misappropriated any user funds” and “do not allege that Binance engaged in any market manipulation”.

The DoJ had initiated an investigation into Binance regarding “violations related to the Bank Secrecy Act (BSA), failure to register as a money transmitting business, and the International Emergency Economic Powers Act (IEEPA)”.

Back in March, the US Commodity Futures Trading Commission (CFTC) filed charges against Binance and CZ alleging “numerous violations” of the Commodity Exchange Act (CEA) and CFTC regulations, while the US Securities and Exchange Commission (SEC) followed up with its own lawsuit in June.

CEO succession
In the same post on X, CZ announces that Richard Teng, who served as global head of regional markets for Binance, has been named as the company’s new CEO.

“Richard is a highly qualified leader and, with over three decades of financial services and regulatory experience, he will navigate the company through its next period of growth,” CZ writes of his successor. “He will ensure Binance delivers on our next phase of security, transparency, compliance, and growth.”

Before joining Binance, Teng previously served as CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market (ADGM), chief regulatory officer of the Singapore Exchange (SGX), and director of corporate finance for the Monetary Authority of Singapore (MAS).

CZ adds that as a shareholder and founder of Binance, he will “remain available to the team to consult as needed, consistent with the framework set out in our US agency resolutions”.

US crackdown on crypto
The news comes just weeks after FTX founder Sam Bankman-Fried was found guilty of fraud following the collapse of the FTX exchange.

“In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases,” says Garland.

“The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”

Commenting on the developments, Keith Berry, general manager, financial crime and compliance, Moody’s Analytics, says the Binance settlement “underscores the need for adequate compliance controls”.

“The rapidly growing yet relatively nascent crypto market has increasingly been targeted and implicated in financial crime due to its borderless nature, which creates the perception that it can be used to obfuscate illicit activities,” he says.

“However, the nature of crypto transactions is that they are traceable and transparent, due in part to the blockchain. Following the money should mean crime can be tackled successfully.”

Tags

Binance AML Money Laundering