The world’s largest cryptocurrency exchange, Binance, has just pleaded guilty in a federal case on account of money laundering. The company has been in the crosshairs of the US Department of Justice since 2019. At the time, it stopped serving US customers due to raised questions on regulatory compliance. It made a change to its name to BAM Trading, and then registered Binance.US as a crypto trading platform in the USA.
However, the Justice Department wouldn’t let it operate. Both it and the SEC have been against Binance and its SEO, Changpeng Zhao, filing corporate action against the exchange this year. After months of speculation, Binance has lost one, and will pay one of the largest corporate penalties in the history of the USA.
Binance Pleads Guilty
The world’s largest cryptocurrency exchange Binance has been locked in some major legal issues in the past few months. It pleaded guilty to federal charges on money laundering earlier this week. The company will now have to pay $4.3 billion in penalties. Its famous CEO, Changpeng Zhao, announced he would be stepping down as CEO. He should also pay $50 million out of his pocket toward the penalties.
CZ isn’t just stepping down – he also pled guilty to felony criminal charges of money laundering. The Department of Justice proved he violated the Bank Secrecy Act after failing to implement an effective AML plan at Binance. This was revealed in a court filing last Tuesday. So, what exactly happened?
Before 2021, Binance allowed its customers to trade on its platform without completing the mandatory KYC procedure. Short for Know Your Customer, this procedure is a must at exchanges, finance websites of all kinds, crypto online casinos, and other organizations. Binance’s CEO CZ believed that by requesting KYC checks for all customers would mean that some may choose not to use Binance. It would interfere with the company’s plans to gain market share, so the KYC check before 2021 wasn’t mandatory.
That’s what set the Department of Justice off. Not having these rules allowed US customers at Binance to trade with criminal enterprises and sanctioned users. According to Secretary Treasure Janet Yellen, Binance processed transactions linked with child abuse, illegal terrorism, narcotics, and more. In total, there were around 100,000 suspicious transactions, and it was clear that the Department of Justice would try to bring Binance down.
It took years, but the company is paying a steep price.
What Happens Next?
Obviously, investors and the company’s employees are concerned about what happens next. Binance will be subject to scrutiny in the next five years from a third-party monitor. CZ has already stepped down from his role of CEO, tweeting that Binance’s Global Head of Regional Markets, Richard Teng, is taking his role.
This kind of legal action gives wings to the CFTC, which once again called for tighter crypto restrictions. The charges will also be a wind in the tail for Binance’s major competitor Coinbase. As we all know, Coinbase has already applied for a Bitcoin ETF, and it may get approved soon. Even sooner maybe, seeing how Binance is taking the fall.