The US Department of Justice is demanding more than 4 billion US dollars from Binance to settle a multi-year criminal case. The world's largest crypto exchange and its CEO Changpeng Zhao ("CZ") are accused of bank fraud, sanctions violations and money laundering, among other things.
Update 20:07 CET: Binance founder Changpeng Zhao agrees to resign and plead guilty. Binance itself also admits wrongdoing and will pay USD 4.3 billion in fines.
The US Attorney's Office has been investigating the crypto exchange Binance for several years. The USD 4 billion settlement payment would be part of a proposed solution by the Department of Justice. The negotiations with Binance also include possible criminal charges against CZ, as Bloomberg reported. The Binance CEO is currently in the United Arab Emirates - safe from an extradition treaty with the US.
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Substantial accusations against Binance
The exact timing and structure of the proposed settlement and the specific charges are unclear. However, Bloomberg insiders expect a fine of at least USD 4 billion. An official announcement could come as early as the end of the month, but so far neither the Department of Justice nor Binance have commented publicly on the situation. The investigation is being conducted by the Criminal Division's Money Laundering and Asset Forfeiture Section together with the National Security Division and the US Attorney's Office in Seattle.
By cleverly exploiting international gray areas in crypto regulation, Binance quickly rose to the top of the crypto exchanges within a few years. The platform operated without a fixed headquarters and thus established itself as a leading trading venue. This regulatory arbitrage is now becoming Binance's undoing. Last year, both the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) filed a lawsuit against the crypto exchange. The Department of Justice is investigating sanctions violations in connection with customers from Russia, Iran and members of Hamas.
Largest crypto exchange rejects allegations
In all previous lawsuits, Binance vehemently denied the allegations of the regulatory authorities. According to the same source, the crypto exchange is also trying to minimize its exposure in these proceedings. In the event of a settlement, the US would refrain from prosecuting Binance as long as the crypto exchange fulfills the given conditions. These include penalty payments and agreement to a detailed statement of facts. In addition, the crypto exchange would be closely monitored to minimize future misconduct.
The Department of Justice's proposal would therefore be a potential compromise that would allow Binance a future as a regulated trading venue. The agreement should offer the exchange the opportunity for continued operation instead of risking a collapse of the world's largest crypto trading venue. However, prosecutors are not accusing the crypto exchange of commingling client funds, which distinguishes the case significantly from the FTX construct.
