Binance chief Changpeng Zhao, the most powerful man in crypto, has lost
his crown – and could see his freedom curtailed as well. He stepped down on
Tuesday.
Zhao pleaded guilty to breaking US anti-money laundering laws as part of
a $4.3 billion settlement resolving a years-long probe into the world’s largest
crypto exchange, said prosecutors.
Besides this, the world’s largest crypto firm has reportedly failed to divulge
over 1 lakh suspicious transactions with militant groups including Hamas,
al-Qaeda and the Islamic State of Iraq and Syria (ISIS).
As per The New York Times report, Zhao and other top officials in Binance
made a wide-ranging effort to evade laws which bar companies from doing
business with criminals and people, who face economic sanctions.
The court documents stated the Binance platform was accessible by
customers situated in Iran, Syria and Cuba – countries which face US sanctions.
Transactions from Hamas
The US Government’s Commodity Futures Trading Commission or CFTC, which
has been investigating the case along with other agencies for years, alleged in
March that Binance failed to implement an effective anti-money laundering
programme to detect terror financing.
It claimed that few Binance employees acknowledged ‘potentially illegal
activities’ facilitated by the platform.
The CFTC said in its March lawsuit that one of the employees received
information in 2019 about transactions by Hamas on Binance. The employee
“explained to a colleague that terrorists usually send small sums as large sums
constitute money laundering.”
Informing about the move, Zhao posted on X, “Today, I stepped down as CEO
of Binance.”
“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.”
Zhao, known as CZ, will personally pay $50 million and is barred from all
involvement with Binance.
US sentencing guidelines call for prison time of 10 to 18 months for the
charges he faces. Prosecutors are seeking an 18-month prison sentence, the New
York Times reported.
Lofty Ambitions
After launching Binance in Shanghai in 2017, Zhao dreamed big. “We want
to take over the entire market!” he told staff in a company chat group that
year.
The 46-year-old CEO did not waver in his belief as he built up his crypto
exchange. Even this year, Zhao felt a major goal was within reach.
“The idea that a five-year-old start-up could mature and operate at the
same level as a financial institution that has been around for 200 years was
once impossible to fathom,” Zhao wrote in January in a review of the previous
year. “But we are nearly there today.”
Zhao’s public aim to be a part of all that has been dashed by Tuesday’s
guilty plea and settlement.
“By failing to comply with US law, Binance made it easy for criminals to
move their stolen funds and illicit proceeds on its exchanges,” US Attorney
General Merrick Garland said on Tuesday.
“Binance also did more than just fail to comply with federal law. It
pretended to comply.”
‘Zhao Answers To No One’
Zhao was born in China before moving to Canada in 1989 at age 12, two
months after China’s Tiananmen Square crackdown on pro-democracy protesters, he
wrote in a blog last year.
The tycoon crisscrossed the globe in his quest for success, working in
Tokyo and New York before moving to Shanghai, where he embraced crypto and
founded Binance.
Its expansion was dramatic. Binance became the world’s biggest crypto
exchange within six months.
Zhao installed a tight circle of associates, many of whom had worked or
studied in China, into top jobs. Co-founder Yi He now runs Binance’s venture
capital arm, as well as other key departments.
As Binance hired more widely from traditional financial and regulatory
worlds, Zhao’s tight control over his company was undiminished. The company,
which calls itself an “ecosystem,” has set up more than 70 entities, most
controlled by Zhao personally.
“Zhao answers to no one but himself,” the Commodity Futures Trading
Commission wrote in March after suing Binance for operating what it called a “sham”
compliance program.
It is unclear whether Zhao will now relinquish control of the firms. In
the meantime, one of his appointees will take over running Binance.
Richard Teng, a senior Binance executive who joined in 2021, is the new
CEO, Zhao posted on social media on Tuesday. Teng “will ensure Binance delivers
on our next phase of security, transparency, compliance, and growth,” he said.
NE Watch Desk With Inputs From Reuters/New York Times
