Former Binance chief Changpeng Zhao has been ordered not to leave the US after pleading guilty to violating anti-money laundering laws.
The founder of the world’s largest cryptocurrency exchange previously agreed to a deal to step down from the company after pleading guilty to violating anti-money laundering rules in a deal that came with $4.3 billion in fines.
Zhao will have to remain in the US until a court in Seattle considers whether he should stay during his sentencing hearing in February or be allowed to return to the UAE, where he is a citizen.
U.S. District Court Judge Richard Jones said Zhao — who flew to the U.S. from the UAE for his guilty plea — will remain “until such time as this Court resolves the government’s motion for review.”
The UAE does not have an extradition treaty with the US, with Zhao’s lawyers calling his “voluntary” presence a sign of good faith.
Former Binance chief Changpeng Zhao has been ordered not to leave the US for the time being after the founder of the world’s largest cryptocurrency exchange pleaded guilty to violating anti-money laundering laws
Zhao, an archrival of Sam Bankman-Fried’s FTX, was released on $175 million bail on Tuesday, with sentencing scheduled for February 23, 2024.
Agreement on the deal was reached last Tuesday. However, Zhao reportedly plans to retain majority ownership in the 2017-founded company.
The court also recommended that Zhao pay a $50 million fine and be barred from any involvement with Binance. He is expected to be sentenced at a later date.
After the guilty plea, Zhao wrote on X: “Today I stepped down as CEO of Binance.”
‘Admittedly, it wasn’t easy emotionally to let go. I made mistakes and I have to take responsibility.’
“This is what is best for our community, for Binance and for myself. Binance is no longer a baby. It’s time I let it walk and run. I know Binance will continue to grow and excel with the deep bench it has.”
Binance also pleaded guilty to a criminal charge and agreed to the hefty $4.3 billion fine, including amounts to settle civil lawsuits brought by regulators against the company.
The company will pay $1.81 billion within 15 months, and another $2.51 billion.
US District Court Judge Richard Jones said Zhao – who flew from the United Arab Emirates to the US for his guilty plea – “until this Court resolves the government’s motion for review.”
Zhao Changpeng, founder and CEO of Binance speaks at an event in Athens, Greece, November 25, 2022
The William Kenzo Nakamura U.S. Courthouse in Seattle, where Changpeng appeared Tuesday
Richard Teng, former Global Head of Regional Market of Binance, was appointed the new CEO. Zhao said Teng would “ensure Binance reaches our next phase of security, transparency, compliance and growth.”
BNB’s cryptocurrency, a token created by Binance, fell about five percent after news of the settlement. Earlier on Tuesday, the token hit a five-month high following reports that the DoJ would soon announce a settlement with the company.
The Justice Department deal, which is detailed in the lawsuits, is part of a major settlement between the company and other U.S. agencies, including the Commodity Futures Trading Commission (CFTC) and the Treasury Department.
Zhao and others were accused of violating the Bank Secrecy Act by failing to establish an anti-money laundering program and violating U.S. economic sanctions.
Binance’s former chief compliance officer Samuel Lim will also be charged as part of the settlement, a source told Reuters, adding that Binance will also be required to fix the deficiencies.
Zhao’s statement also noted that the deal with the government agencies “does not allege that Binance has embezzled user funds, and does not allege that Binance has engaged in market manipulation.”
The indictment against Zhao and Binance, unsealed on Tuesday, says the company conducted money transmission activities without a license, violating the International Emergency Economic Powers Act.
It accuses Zhao and Binance of engaging in a “deliberate and calculated attempt” to profit from the US market without adhering to its rules.
The deal ends years of investigation by US regulators into Binance. It aims to allow Binance to continue operating instead of collapsing, which would negatively impact the markets and crypto holders.
The US government tried to strike a balance between cracking down on Binance and completely disrupting the industry after several high-profile bankruptcies last year, including the bankruptcy of Binance’s former archrival FTX.
The indictment against Zhao and Binance, unsealed on Tuesday, says the company transferred funds without a license
After his guilty pela, Zhao said, “With Richard and the entire team, I am confident that the best days ahead for Binance and the crypto industry. As a shareholder and former CEO with historical knowledge of our business, I will remain available to the team for guidance as needed, in accordance with the framework set out in our US agency resolutions.”
Zhao added, “What’s next for me? I’m going to take a break first. I haven’t had a single day of real break (phone off) in the last six and a half years. After that, my current thinking is that I’ll probably do some passive investing since I’m a minority token/shareholder in blockchain/Web3/DeFi, AI, and biotech startups. I’m glad that I will finally have more time to look into DeFi.
‘I no longer see myself as CEO of a startup. I am satisfied as a one-time (happy) entrepreneur. If there are any listeners, I might be open to being a private coach/mentor for a small number of emerging entrepreneurs. If nothing else, at least I can tell them what not to do.”
Binance has been under the scanner of the Ministry of Justice since at least 2018.
Federal prosecutors at the agency in December 2020 asked the company to provide internal records about its anti-money laundering efforts, along with communications involving Zhao, who founded the company in 2017.
The CFTC filed civil charges against Binance in March, alleging the company failed to implement an effective anti-money laundering program to detect and prevent terrorist financing.
Internally, Binance officials and employees acknowledged that the platform facilitated “potentially illegal activities,” the CFTC alleged.
In February 2019, Binance’s former Chief Compliance Officer Lim received information about transactions by the militant Palestinian group Hamas on Binance, the CFTC wrote.
Lim, a Singaporean, “explained to a colleague that terrorists usually send “small amounts” because “large amounts constitute money laundering,” the CFTC said in its March lawsuit.
Zhao, a billionaire who was born in China and moved to Canada at age 12, said the CFTC’s “complaint appears to contain an incomplete recitation of facts, and we disagree with the characterization of many of the alleged issues.”
Zhao was an early FTX investor and withdrew just days before the collapse. He is seen with convicted fraudster, FTX founder Sam Bankman-Fried
The SEC alleged in 13 charges that Binance artificially inflated its trading volumes, diverted customer funds, failed to keep U.S. customers off its platform and misled investors about its market surveillance controls.
The agency’s lawsuit has prompted investors to pull about $780 million from the cryptocurrency exchange, forcing the company to eliminate about a third of its U.S. workforce and reducing its trading balances to a trickle.
Data firm Nansen said Binance saw a net outflow of $778.6 million in crypto tokens within 24 hours of the filing of the SEC lawsuit, and Binance recorded a net outflow of $13 million.
Binance denied the SEC’s allegations and said it would “vigorously” defend its platform.
The SEC lawsuit against Binance came about eight months after the collapse of FTX, which was also accused of commingling customers’ funds and investing the proceeds in risky investments that customers did not know they were participating in.
Days before FTX collapsed, Zhao said Binance would liquidate its FTT tokens, a cryptocurrency issued by FTX.
Binance’s announcement caused a run on the bank at FTX, but the company did not have enough money to pay investors looking to withdraw their assets as customers tried to withdraw $6 billion within 72 hours.
Bankman-Fried was ultimately convicted of large-scale fraud against FTX customers.